How Kenya’s largest bank performed amid inflationary pressures
Key questions:
- How did tightening monetary policies and interest rate hikes implemented by the Central Bank of Kenya (CBK) impact KCB's key performance indicators?
- Unlike other tier-1 banks in Kenya, the Kenya Commercial Bank (KCB) recorded a decline in net profits in the first half of 2023 amidst a challenging economic environment. What influenced this performance?
The first-half performance of the Kenyan banking sector in 2023 uncovered significant developments, such as overall net profit growth among most of the country’s nine tier-1 institutions. These banks recorded the performance amid rising interest rates, high inflation and exchange rate devaluations.
But, Kenya Commercial Bank (KCB) Plc, Kenya's largest bank by assets, drew particular attention for its H1 '2023 performance.
The bank recorded a 17.9% decline in net profit as of June 2023 and a non-performing loans (NPL) ratio of 17.4%, significantly above industry peers and 340 bps above the sector's average, 14.5%.
These figures underscore the challenges faced by even the largest player in the industry. Arguably, the bank is the largest lender to households and businesses, making it a risk of high default rates.
Inflation was also stickily high in the first half of 2023, soaring beyond the CBK target range of 5% ± 2.5%, as shown
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