Fitch Rates KCB Group Plc and KCB Bank Kenya Limited ‘B+’

Fitch Ratings has assigned KCB Group Plc (KCB Group) and its main and wholly-owned operating subsidiary KCB Bank Kenya Limited (KCB Bank) Long-Term Issuer Default Ratings (IDRs) of ‘B+’ with Stable Outlooks.

The Bank’s Long and Short-Term National Rating remains affirmed at B+; outlook stable and B respectively. This rating denotes expectations of very low default risk and strongest capacity for timely payment of financial commitments relative to other issuers or obligation in the country. The B rating also denotes a particularly strong liquidity profile.

KCB Group CEO, Joshua Oigara

The agency also cited the bank’s solid earnings and strong capital buffer, a strong domestic retail and corporate franchise and management quality, a well-structured deposit-based funding model, high level of liquid assets, and stable customer deposits.

“KCB Group and KCB Bank IDRs are driven by their intrinsic creditworthiness, as defined by their Viability Ratings (VRs). Rating strengths include a strong company profile underpinned by KCB Bank’s leading retail and corporate franchise in Kenya and management quality. The VRs assigned to KCB Bank and to KCB Group are influenced by a challenging domestic operating environment, which indirectly constrains other rating factors. Rating strengths include a strong company profile, underpinned by KCB Bank’s leading retail and corporate franchise in Kenya and management quality,” said the rating agency.

The VRs also reflect solid earnings and profitability and a healthy funding profile dominated by low-cost and stable customer deposits.

When assigning the VRs, Fitch also considered KCB Group’s expanding regional presence and its significant diversification benefits. KCB Group is one of the leading banking groups in East Africa, with subsidiaries in Uganda, Burundi, Rwanda, Tanzania, South Sudan and a representative office in Ethiopia.

“KCB Group’s strategy hinges on consolidating its position in existing markets and growing the customer base by utilising digital banking channels,” the rating agency noted.

It added that: “The National Ratings assigned to KCB Group and KCB Bank reflects Fitch’s view of their relative creditworthiness within Kenya. They are based on their standalone financial strength.”

KCB Group Chief Executive Officer and Managing Director Joshua Oigara said the Bank’s outlook reflects the Bank’s ability to meets its financial commitment and is well positioned to support the customers financial well-being.

“The rating is significant for the bank and we remain committed to continue improving our competitive position in key products and services across the region. I believe we are well positioned for growth and I am convinced that digitization is a huge opportunity for us. That’s why we are at the forefront of technological development in finance and beyond,” said Mr Oigara.

The rating agency said that it views asset quality as a rating weakness and that its latest rating considered a rising impaired loans ratio (8.6 % at the end of 2017), which reflected the deterioration in domestic corporate lending. Fitch Ratings attributed this to large credit concentrations by single borrowers and industry but noted that reserve coverage has been improving due to the implementation IFRS 9 (International Financial Reporting Standards).

The Bank’s Long and Short-Term National Rating remains affirmed at B+; outlook stable and B respectively. This rating denotes expectations of very low default risk and strongest capacity for timely payment of financial commitments relative to other issuers or obligation in the country. The B rating also denotes a particularly strong liquidity profile.