Global credit rating agency Standard & Poor’s has affirmed the ‘B+/B’ long- and short-term credit ratings for KCB Group with a stable outlook due to resilient earnings.
The agency said KCB’s performance has been stable despite regulatory headwinds in Kenya and challenging economic conditions in some East African countries where the group has operations.
“The stable outlook on KCB mirrors that on Kenya (B+/Stable/B) and our expectations that the bank’s business and financial profiles will remain broadly unchanged over the next 12 months,” said S&P.
The agency adds that despite its expectation of muted loan growth of only five per cent in the next 12 months, and the interest rate caps remaining in place, KCB will ride on positives such as growing non-interest income to post robust earnings in 2018.
In February, Moody’s Investors Service, another rating agency had downgraded KCB Group, Equity and Co-operative — from B1 to B2 following the weakening of the credit profile of government that saw it downgraded.
However, the rating agency notes that KCB’s asset quality has remained under pressure, with nonperforming loans ratio increasing to 8.5 per cent at the end of 2017 from 7.9 per cent a year earlier. It expects KCB to step up efforts to clean up its loan portfolio.
“We expect KCB’s non-performing loans will improve gradually, stabilising at around eight per cent since the group expects some recoveries in the coming months,” notes S&P.
The agency warned it could lower the ratings of the bank if its asset quality deteriorated beyond the expectation over the next 12 months or if it cuts its ratings for Kenya.
KCB Group chief executive Joshua Oigara said the outlook reflects the bank’s ability to meet its financial commitment and it is well positioned to support the customer’s financial needs.
“We continue to focus on improving credit quality, improving our financial profile and strengthening the risk management capabilities to improve on overall performance,” said Mr Oigara.