Global rating agency Standard & Poor’s (S&P), has revised KCB Bank’s outlook from negative to stable, saying it is poised to maintain its strong business position and stable financial performance into the future. The move follows a similar action for Kenya.
In its latest assessment of the region’s biggest bank by asset and profitability, S&P reaffirmed a rating of ‘B+/B’ for KCB Bank.
The positive rating and improved outlook is supported by solid profitability metrics, a strong domestic retail and corporate franchise, strong capital buffers, a well-structured deposit-based funding model and high level of liquid assets.
“It is our opinion that KCB’s business position will be supportive of the group’s broadly stable asset quality and capitalisation in the context of strong economic performance and growth prospects in Kenya,” said the rating agency.
“As such, we think that KCB will be well placed to benefit from the stronger operating environment and will maintain a broadly stable financial profile.
KCB Group Chief Executive Officer and Managing Director Joshua Oigara (pictured) said the Bank’s future outlook remained positive riding on increased and deliberate strategic investments in digital solutions and customer centric propositions anchored on new technology. “The rating confirms that KCB fundamentals remain strong and we are going all out to solidify this position,” said Mr Oigara.
With a new operating environment in the Kenya’s financial sector following the enactment of a law capping interest rates, S&P believes that KCB is best placed to weather the storm.
“While we expect credit losses will increase and margins will reduce on the back of interest rates caps introduced to the sector, we think that the group’s access to low-cost deposits, competitive margins, and well established corporate lending franchise will support its earning generation over the next 12-18 months,” said S&P.
KCB’s loan portfolio is fairly diversified across sectors, reflecting the variety of the Kenyan economy and its buoyant private sector. “KCB is funded by short-term customer deposits and enjoys a sizable portfolio of liquid assets,” said the agency.
Last week, S&P assigning a similar rating for the country, saying the country’s economic growth performance and prospects remain strong and both fiscal and external performance has improved recently.
“We expect Kenya will continue to post strong growth over our forecast horizon through 2019, reflecting a relatively well-diversified economic base and a strong private sector with increasing regional importance,” it said.
S&P noted that since the last review, Government financing pressures have abated somewhat, interest rates have come down, and the exchange rate has remained stable.
The rating agency is forecasting that the Kenyan economy will continue to grow at six percent and that Kenya’s largest bank by asset base is well-positioned to reap from the better country. grade.