KCB’s 1Q2016 profit grew more than 6%

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Kenya Commercial Bank Ltd (NSE:KCB) has reported that its net income for the quarter ended March 31 (1Q2016) rose more than 6%. But it was a difficult quarter for the lender as it continues to struggle with ballooning nonperforming loans. 
The net income of Sh4.63 billion that KCB posted in 1Q2016 rose 6.1% over the same quarter a year ago. The bank didn’t update on its consolidated revenue for the quarter, but said net interest income jumped 24% to Sh11.5 billion.


Nonperforming loans
Kenya Commercial Bank Ltd (NSE:KCB) reported that its bad loans in 1Q2016 spiked 43% to more than Sh26 billion, forcing the company to more than double its provision for loan losses. The Sh1.37 billion provision for bad loans in 1Q2016 was up 149% over the like quarter in 2015. The lender disclosed that its Kenyan unit contributed the bulk of the nonperforming loans in the latest quarter.  With that, KCB’s CEO, Joshua Oigara, has his job cut out for him to try and steer the lender out of swelling bad credit, which could potentially cripple operations in a financial meltdown situation.
KCB’s disclosure of rising bad loans seems to back recent claims by central bank Governor Patrick Njoroge that local lenders have not been provisioning sufficiently for sour loans. According to Njoroge, bad loans account for nearly 8.2% of Kenyan lenders’ total loans.


What next for KCB?
Kenya Commercial Bank Ltd (NSE:KCB) is East Africa’s largest bank by assets. According to CEO Oigara, the management wants to focus on continued diversification of the lender’s revenue streams in the balance of 2016 and beyond. In particular, he said KCB would double down on mobile payments market, which the management hopes is important in deepening financial inclusion in the KCB’s markets.
KCB is yet to file its audited 1Q2016 results with the regulator.


Shares in Kenya Commercial Bank Ltd (NSE:KCB) gained 1.27% to close at Sh39.75 on Thursday, a day characterized by heavy volume trading.  About 1.17 million shares changed hands, just near the daily average volume of 2 million shares. During Thursday’s action, KCB shares rallied to high of Sh40 and dipped to an intraday low of Sh39.50. The shares have rallied up and down in the band of Sh36 to Sh61 over the last 52-weeks.


Analysts at AIB Capital have a BUY rating and a price target of Sh55 on the stock of KCB, suggesting an upward potential over the prevailing stock price.

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