The decision to consolidate its position in markets already served is a blow to the lender’s ambition to become a pan-African bank in the next three years.
KCB Group has halted its continental expansion programme after posting minimal growth in net earnings for the 12 months period to December 2016.
The decision to consolidate its position in markets already served is a blow to the lender’s ambition to become a pan-African bank in the next three years.
It is also a reflection of the tough decisions commercial banks have been forced to take in the wake of shrinking margins since interest rate caps were introduced in Kenya last year.
The decision also confounds the expectation that Kenyan banks would be looking outside national borders more to supplement domestic margins with returns from new markets where credit is not subject to pricing controls.
KCB’s board said that the proposal to raise Ksh10 billion ($100 million) of additional capital through a rights issue has been postponed indefinitely and the bank will now focus on consolidating its existing business in Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan.
“We are not going into open new markets. Our goal is to strengthen our operations in the existing markets. The rights issue has been postponed and we are going to communicate to shareholders at our annual general meeting,” chief executive Joshua Oigara told an investor briefing in Nairobi last week.
Last year, the bank said it needed to build its financial muscle in order to fund huge infrastructure projects and enhance its presence in at least 10 markets by 2020.
Top on the list were countries such as Somalia, Mozambique and the Democratic Republic of Congo.
NIC Bank
Meanwhile, NIC Bank, which has operations in Kenya, Uganda and Tanzania, posted a three per cent drop in net profit during the same period, weighed down by increase in non-performing loans.
“The bank is consolidating its business and relooking at our strategy on the back of the interest rate capping. We are re-evaluating our business in this new operating environment and we will be rolling out new products and services to ensure we continue being competitive by investing in our digital platforms,” said NIC Bank Group managing director, John Gachora.
Other banks that have announced their 2016 full year results include Barclays Bank Kenya and Stanbic Kenya Holdings. The results showed reductions in profit margins and earnings per share.
Sharp contract with Rwandan banks
The outcomes in Kenya contrast sharply with those in Rwanda where the bellwether Bank of Kigali (BoK) posted a 1.3 per cent growth in net earnings to $25.7 million for the year 2016, and declared a dividend of $0.02 per share.
“Our shareholders will be pleased with the Bank’s performance and investment in 2016,” said BoK chairman, Marc Holtzman.
The introduction of interest rate capping in Kenya, instability in South Sudan and challenges in Tanzania, Uganda and Burundi saw KCB’s net profit grow marginally by one per cent to Ksh19.72 billion ($197.2 million) from Ksh 19.62 billion ($196.2 million) in 2015.
“We saw sustained business resilience in a relatively tough-macroeconomic environment across the East African region. Markets like South Sudan, Burundi and Uganda experienced business shocks as was the case with Kenya where an interest capping regime redefined the operating environment,” said KCB Group chairman Ngeny Biwott.
