KCB Profits Stabilize as Revenues Soar 2.0% up
KCB Group reported KES 21.18Bn profits before tax (PBT) for the first quarter of 2025 (Q1-2025), representing a marginal growth from KES 21.16Bn reported similar period in 2024. The performance was strongly supported by the expanding core revenue lines and a prudent cost management. We view the cost of financing to have been organically driven down by the retained earnings oin the last two to three years. As a result total revenues grew up 2.0% to KES 49.44Bn in Q1-2025 from KES 48.49Bn but strained by drops in the non-funded income lines.
KCB Kenya witnessed a 0.7% drop in PBT to KES 14.52Bn as subsidiaries’ recorded a 1.9% uptick in PBT from KES 6.54Bn in Q1-2024 to KES 6.66Bn, to contribute 31.5% of the total PBT from that of 30.9% recorded in Q1-2024. This is as subsidiaries’ pick momentum to record a 6.5% growths in interest income compared to the local parent company whose interest income rose by only 0.4%.
The Group’s net revenues were up 0.4% to KES 16.54Bn, out of which 33.1% or KES 5.47Bn came from subsidiaries, 3.0% y-y up compared to KES 5.32Bn of Q1-2024. We retain a BUY recommendation on the Group’s share price at the current price of KES 40.80 per share as of 23rd May 2025, with a fair value of KES 54.00 and a dividend projection of above KES 4.50 per share for full year 2025 (FY-2025). This is against an annualized earning per share (EPS) of 80.12 of 92.45 price to book value ratio and a price to earnings ratio of 0.5x and price to book ratio of 0.4x.
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Income Statement
Group net interest income (NII) jumped 8.5% up to KES 33.72Bn from KES 31.04Bn supported by low cost of financing the Bank’s loan book which we view benefitted from the prior years’ retained earnings. This saw NII contribution expanded to 68.2% in Q1-2025 from that of 64.1% in Q1-2024 and 67.0% in Q4-2025 riding on its core interest lines.
Total interest income improved 2.2% year on year (y-y) from KES 49.09Bn in Q1- 2024 to KES 50.19Bn mainly benefiting from interest incomes from loans which offset the 7.9% decline in interest from government securities.
Interest from loans and advanced expanded 5.3% y-y from KES 33.63Bn to KES 35.46Bn reaping off from the elevated lending rates, though declining fast, and the marginally enlarging loan book. Consequently, the yield on loans and advances advanced up from 12.7% in Q1-2024 to 14.1% in Q1-2025 benefiting from its digital loans and higher rates. This was however lower in relation to a yield on advances of 14.7% for FY-2024, confirming the shrinking interest rates.
Interest from government papers however, dipped 7.9% y-y from KES 13.32Bn to KES 12.27Bn on a sharp drop in rates on government papers as the government sought faster transmission of the interest rate cut. During the period the Central Bank Monetary Policy Committee (MPC) cut the official base lending rate by 50.0bps from 11.25% to 10.75%, being the fourth rate cut from a high of 13.0% witnessed between February and August 2024. This overweighed the 1.3% rise on the bank’s government securities asset book.
Interest expense dipped 8.6% from KES 18.02Bn to KES 16.47Bn as the bank implemented the above rate cuts to placements from other financial institutions while also leveraging re-investments from prior profits to reduce costs. Expense on customer deposits was contained at a 1.4% rise to KES 12.90Bn while that on banking placements sunk 28.7% from KES 4.85Bn to KES 3.46Bn.
Non-funded income (NFI) thinned 9.8% y-y from KES 17.42Bn to KES 15.72Bn accelerated down by forex trading revenue. Foreign exchange revenue plunged 34.7% from KES 4.80Bn to KES 3.13Bn impacted by a stable Kenya shilling that saw forex margins drop drastically. This is opposed to the exchange movement between 1st January and 31st March 2024 where the exchange was so volatile.
Operating expenses were contained at a 3.4% rise from KES 27.33Bn to KES 28.26Bn largely held down by low loan loss provisions. This was as provisions for bad loans stabilized down 11.3% from KES 6.32BN to KES 5.60Bn driven down by low loan disbursements.
Staff costs were up 13.3% to KES 10.94Bn propelled by annual increments for inflation and absorbed employees’ costs from its growing subsidiaries.
Excluding loan loss provisions, operating costs were up 7.8% from KES 21.01Bn in 2024 to KES 22.66Bn.
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Balance Sheet
KCB Group balance sheet hit above KES 2 trillion at KES 2,034.17Bn, a 1.9% rise from that of KES 1,996.20Bn of Q1-2024 largely on marginal loan book and government securities book upticks.
Total loan book attracted only 0.1% or KES 1.15Bn to KES 1,018.57Bn largely slowed down by subsidiary loan book performance which trimmed 19.1% from KES 319.18Bn to KES 258.28Bn. NBK loan book shed 13.6% from KES 80.87Bn in Q1-2024 to KES 70.71Bn on reduced focus at the wake of the ongoing transfer.
Government securities book attracted0nly 1.3% to KES 398.24Bn while the Bank’s local and foreign cash jumped 50.9% from KES 33.63BN to KES 50.74Bn thus providing more room for lending expansions.
Borrowed funds surged 7.5% from KES 76.09Bn in Q1-2024 to KES 81.65Bn as the bank sought to finance some of its subsidiaries.
