In the Q3’2022 Earnings Release late yesterday, NCBA Group announced that nearly doubled its Profits After Tax in Q3’2022, recording a massive 96.2% increment to Kshs 12.8 bn from Kshs 6.5 bn in Q3’2021.
The huge jump in profits comes after the Group recorded an industry-leading 162.9% increase in its Foreign Exchange Income to Kshs 9.2 bn from Kshs 3.5 bn in Q3’2021, with the Group CEO John Gachora attributing the increase to NCBA’s deliberate efforts to deliver much needed Foreign exchange in the Kenya market.
Driven by the increased Foreign exchange income, non-interest income increased by 40.1% to Kshs 22.5 bn from Kshs 16.1 bn in Q3’2021, outpacing the 15.1% growth in net interest income which came in at Kshs 23.2 bn from Kshs 20.2 bn in a similar period last year.
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Key to note though, Interest income from brick-and-mortar loans and advances recorded single-digit growth at 4.9% while interest income from Government securities recorded a 23.8% growth, attributable to the upward readjustment of the yield curve.
The Group, which operates in Kenya, Tanzania, Rwanda, Uganda, and Ivory Coast also reduced its Loan Loss Provisions by 9.2% to Kshs 8.3 bn from 9.2 bn in Q3’2021 whereas staff costs increased by 19.9% to Kshs 7.9 bn from Kshs 5.9 bn leading to a 8.9% increase in Total operating expenses by 8.9% to Kshs 26.9 bn from Kshs 24.7 bn in a similar period last year.
Despite this, the Cost to Income without LLPs ratio improved by 2.2% points to 40.5% from 42.7% in Q3’2021, a measure of improved efficiency.
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Net Loans and advances to customers increased by 11.7% to Kshs 266.1 bn, while Government securities allocation increased by 9.1% to Kshs 206.8 bn, leading to a 5.8% total assets expansion to Kshs 595.4 bn from Kshs 562.6 bn.
Customer deposits grew at a slower pace than loans at 3.2% to Kshs 462.1 bn from Kshs 447.6 bn, leading to the Loan to Deposit ratio increasing to 57.6% from 53.2% in Q3’2021. Key to note, the Group improved its gearing ratios following a 37.5% decline in its borrowed funds to Kshs 4.5 bn from Kshs 7.2 bn in Q3’2021.
The Group’s asset quality significantly improved in Q3’2022, with its Gross non-performing loans declining by 20.9%, adding to a 7.2% gross loans expansion, taking the Gross NPL ratio to 12.6%, from 17.0% in Q3’2021. NCBA’s NPL ratio stands at 1.2% points lower than the Banking sector average of 13.8% as of October 2022. Increased profitability also led to a 7.4% points increase in the Return on average Equity to 21.2% from 13.8% in Q3’2021.
The Group’s aggressive digitization strategies have continued to bear fruit, with loans disbursed in the period between January and September valued at Kshs 521.0 bn, a 23.0% growth from a similar period last year, which the Group aims to continue tapping into. According to the Group CFO David Iboga, they expect contributions from subsidiaries outside Kenya to net profits to increase to at least 10.0% in the near term from the current less than 1.0%.
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