KCB upbeat about growth and dividend momentum

KCB Group??has reported a 131% net profit jump to Sh25.1 billion in the nine months to September when it also declared an interim dividend of Sh1 per share.?I had the opportunity to speak to the Business Daily on the financial results, as well as the bank's regional expansion.

Are we likely to see KCB's dividend payments go back to the pre-pandemic era?

We see a very strong outlook for our businesses in terms of performance so the recovery is strong. We will be able to maintain our dividend momentum before the Covid-19 pandemic.

That is a payout of sh3.5 per share?

I cannot commit on a dividend number at this stage but I think the momentum is that we are looking at our final dividend as full-year results come out.

Banks have shown an eagerness to pay interim dividends in this third quarter close to the end of the financial year. Has the Central Bank of Kenya (CBK) lifted restrictions on cash distributions that were put in place in the wake of the pandemic?

It wasn’t really a restriction. What the CBK said was that you needed to share with them your plan for your dividend and your business focus. It was actually more of giving us your proposal. Even last year a number of banks paid dividends.

The guidelines are still there and even, in this case, you will still have an active engagement. It doesn’t stop. Some markets issued prohibitions. This was an advisory and we support that move by the central bank.

We are still in the environment of conserving cash but also where we see opportunities to also give a dividend to our shareholders we do both, which I think is a win-win.

When do you anticipate you will complete the acquisition of Bancabc Tanzania?

In Tanzania, we are waiting for final feedback. It has delayed a lot. It has taken us a year since we announced in November last year. We should be able to have a view of Tanzania by the end of this year.

Have you completed the acquisition of Rwanda's BPR, including the minority shareholders?

Rwanda has been completed. We do have local shareholders who have stayed. We own 76 percent today comprising 62 percent acquired from Atlas Mara and 14 percent bought from Arise.

Our ambition is to acquire the remaining 24 percent in the next year. We are still keen to acquire 100 percent of BPR.

Was there a deadline by which the minority shareholders were to accept KCB's buyout offer?

There is no deadline. The offer is still running. We gave them the offer after Atlas Mara. We are still waiting.

NBK??is still not compliant with various minimum capital requirements. You previously said the subsidiary will achieve compliance through its own cash flows and loan recoveries. Is that still the position?

NBK will be compliant as I said, looking at what they are doing today. Their performance for the last nine months has been strong. We have done our simulations and we should be compliant before the end of the year. This is one of the strongest performances by NBK that we have seen in many years.

After the acquisitions in Rwanda and Tanzania, will you now focus on consolidation or do you still see scope for further regional expansion?

For us, Rwanda has been a very significant acquisition in terms of growth momentum. We have 137 branches in Rwanda. We are a very strong SME institution in the market which is a catalyst for our growth in the region.

So we continue to look at opportunities in the Democratic Republic of Congo as a key focus market for us. That is the only area we are looking at.

Do you plan to enter DRC through an acquisition?

We said earlier our strategy is more of a merger and acquisition in these markets. It’s not a greenfield approach.

Will you seek another term at KCB at the end of your current contract in December 2022?

That is a good question but I don’t have a good answer for you. It is really the board that looks at the opportunity to continue to serve so that question is not for me to answer.

I think I have done a great job building the business. We are on very good momentum. We have achieved significant milestones. My terms of contract are renewable but it’s the board that will make that decision.

The ban on reporting defaults on loans of less than sh5 million to credit reference bureaus took effect recently. How do you see this impacting lending in the short term?

It is still early stages of working with the CBK to find a solution on how we continue advancing credit. I don’t have a clear answer for you at the moment.

Besides regional expansion, what is KCB's current focus in the existing business?

SMEs are a key focus area. We intend to grow the size of our SME lending from the current eight percent of our overall loan book to 15 percent. These are mostly short-term facilities, providing their working capital requirements as the economy grows.