KCB cuts dividend by a third as profit hits Sh40bn

KCB Group CEO Paul Russo during the interview at the lender’s headquarters on February 15, 2023. PHOTO | DIANA NGILA | NMG

KCB Group has cut dividends by a third on DRC Congo entry costs despite the net profit rising 19.5 percent to Sh40.8 billion in the financial year that ended in December.

The lender’s board is proposing a final payout of Sh1 per share —being equal to January’s interim payout— bringing the combined payout to Sh2 per share or a total of Sh6.4 billion.

The payout represents a 33 percent cut from the Sh9.64 billion that was paid on the previous year’s performance when the net profit was Sh34.2 billion.

The latest distribution to shareholders translates to 15.7 percent of the net earnings.

KCB has linked the dividends cut on regional expansion moves including the mid-December acquisition of an 85 percent stake in DRC Congo’s Trust Merchant Bank (TMB) in a transaction that cost it an estimated Sh17.9 billion.

Read: KCB Group makes U-turn on full buyout of DRC bank

“We have made significant investments in our regional expansion strategy among them, our latest entry into DRC through TMB bank. These investments are key to accelerating our future growth and commitment to delivering shareholder value,” said Andrew Wambari Kairu, KCB Group chairman.

The final dividend will be payable to the members of the company on the share register at the close of business on April 6, if approved by shareholders.

KCB’s dividend cut bucks the trend where its peers including Stanbic Kenya, Absa Bank Kenya and Standard Chartered Bank of Kenya have all raised their payouts to record levels on increased profits.

The lender had paid Sh11 billion on 2019 performance and cut this to Sh3.2 billion the following year on Covid-19 disruptions that sent firms into cash preservation mode.

KCB group chief executive Paul Russo said the rise in profit was helped by increased interest and non-interest income during the review period.

“The strong performance for the year was a result of our business strategy that is anchored on customer obsession, sharper execution, and a productive organizational culture,” said Mr Russo.

“The business benefited from a vibrant core banking business, growth of new business lines and accelerated digital transformation to post this record performance.”

Customer loans increased by 27.8 percent to Sh863 billion from additional lending in the Kenya business, increased lending in the international businesses and the acquisition of TMB.

The growth in loan books saw the net interest income increase by 11.5 percent to Sh86.65 billion.

Non-funded income grew by 39.8 percent to Sh43.25 billion largely from trade finance income, lending fees and commissions.

Operating expenses however rose from Sh60.82 billion to Sh72.6 billion on the back of increased staff costs and provisioning for loan defaults.

Read: KCB writes off, sells bad loans as lender pursues defaulters

Staff costs rose by 22.5 percent to Sh30.26 billion, partly on costs of running TMB while provisions for loan defaults rose by 2.3 percent to Sh13.2 billion. The ratio of non-performing loans) stood at 17.3 percent.

KCB’s total assets grew by 36.4 percent to Sh1.55 trillion, helped by increased lending, and investment in government securities and funded by growth in customer deposits and additional borrowings.

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