KCB Kenya Banking on Mobile-Loan Recoveries to Boost 2020 Profit

“We expect to recover those bad loans in 2020,” Oigara said in an interview in the Kenyan capital, Nairobi. Lending will probably increase 15% this year, he said.

The integration of bad-debt laden National Bank of Kenya Ltd., which KCB purchased last year, did not hurt earnings significantly, he said. NBK’s ratio of non-performing loans dropped to 44% at the end of the fourth quarter from 51% and is expected to fall to 20% this year and to 10% in 2021, Oigara said.

“Whereas initially our model was to buy National Bank and shut down everything and re-brand to KCB, we are seeing that by keeping NBK longer we are creating more value for our customers and getting market share which we had lost,” Oigara said.

The KCB-NBK deal was one of several recent tie-ups in the East African nation as banks strengthen capital structures amid closer regulatory scrutiny. More mergers can be expected as the banks try to stave off competition and protect margins, Oigara said.

Ethiopia
Other than fortifying their home business, KCB and rivals including Equity Group Holdings Ltd. and NCBA Group Plc have been extending their reach regionally.

KCB, which has operations in five other countries, is in early-stage talks with two Ethiopian banks on a joint venture for financial technology services while waiting for the Horn of Africa state to finalize policy on granting foreign banks commercial licenses, Oigara said.

Such a venture would earn KCB, which operates Kenya’s biggest mobile-based banking service after NCBA, fees as a fintech-services provider, he said.

“If we are not able to open our financial institution through a license, then we can provide our experience in digital lending,” Oigara said.