2013-06-KCB%20(Final)

Kenya Bank Credit Rating Report | Public Credit Rating
Kenya Commercial Bank Limited
Kenya Bank Analysis June 2013
Security class Rating scale Rating Rating outlook Expiry date
Long term National AA(KE)
Short term National A1+(KE)
Financial data:
(US$’m)
31/12/11 31/12/12
KShs/US$ (avg.) 90.1 86.7
KShs/US$ (close) 86.5 86.0
Total assets† 3 823.3 4 271.8
Tier I capital‡ 444.0 489.8
Tier II capital‡ 17.5 32.6
Net advances 2 297.4 2 461.2
Liquid assets 1 318.5 1 577.7
Operating income 411.8 508.2
Profit after tax 121.9 140.7
Market cap. *
US$1.27bn
Market share **
13.1%
† Including off-balance sheet items.
‡ Refers to the calculation of regulatory capital
as per banking regulations.
* Market cap as at 13 June 2012.
** Based on GCR’s estimates of total banking
industry assets for 2012.
Rating history:
Not applicable
Related methodologies/research:
Banking Criteria (updated 2013)
Kenya Bank Bulletin (June 2012)
GCR contacts:
Primary Analyst
Jennifer Mwerenga
Senior Analyst
jennifer@globalratings.net
Committee Chairperson
Dirk Greeff
Sector Head: Financial Institution Ratings
dgreeff@globalratings.net
Tel: +27 11 784 – 1771
Website: http://globalratings.net
Summary rating rationale
The ratings are based on the following key factors:
The accorded ratings reflect Kenya Commercial Bank Limited’s
(“KCB” or “the group”) established domestic and regional
franchise value. Further, KCB displays a strong balance sheet, as
well as risk appropriate capital cushioning. These are, however,
partly offset by the variability of earnings across operating
jurisdictions. The market is also vulnerable to weather changes
(impacting on food security) and setbacks in the global recovery.
KCB is the largest bank in Kenya accounting for 13% of all assets
as at FYE12. Government support is considered likely, given that
KCB’s size and market presence poses significant systemic risk
should the institution fail. Government’s shareholding was also
factored in, albeit on a limited use basis.
Impacted by the difficult operating environment across all target
markets, consolidated impaired loans increased 21% in F12. The
gross non-performing loans (“NPLs”) ratio increased to 6.7% as at
FYE12, up from 5.9% in the previous period and above the
industry average of 4.7%. Provisions covered 60% (FYE11: 65%)
of NPLs, while lending is generally on a collateralised basis.
Further, net NPLs remain negligible as a percentage of capital at
2.8%.
A pre-tax profit of KShs17.2bn was recorded for F12, up 13.7%
(F11: 54%) from the previous year. The slowdown in earnings
growth was due to restrained loan growth, higher impairment
charges and low trading volumes.
Although KCB displays contractual asset/liability mismatches,
this is in line with the market with roughly 25% of advances
maturing within 1 month, compared to 74% of deposits as at
FYE12. Liquidity risk is partly ameliorated through maintaining a
liquid balance sheet. Liquid assets covered short-term funding by
45.6% as at FYE12, against a prudential minimum of 20%.
Factors that could trigger a rating action
Stable 06/2014
Positive movement/s: Improved earnings performance, while
maintaining credit protection ratios will be considered positive.
Negative movement/s: A weakening of earnings and asset quality
problems associated with inadequately controlled growth, weak credit
administration, uncertain political environment and the weakened
global economic outlook.

Corporate profile
Business summary
KCB’s roots can be traced back to 1896 when it
established its first outlet in Mombasa as the National
Bank of India (“NBI”). In 1904, NBI extended its
operations to Nairobi, which had become the
headquarters of the expanding railway line to
Uganda. In 1958, NBI merged with Grindlays Bank
(“Grindlays”) to form the National and Grindlays
Bank (“NGB”). Upon Kenya’s independence in 1963,
the Government of Kenya acquired a 60% stake in
NGB. The Government acquired full control in 1970
and renamed the bank, Kenya Commercial Bank
Limited. Over the years the Government has
gradually reduced its stake in KCB to 35% and more
recently to 26.2% on the back of a rights issue in
2004 (which raised KShs2.5bn). A second rights
issue in 2008 reduced Governments shareholding to
23.1% (raising Kshs5.5bn additional capital). A third
rights issue in 2010 raised Kshs12.5bn and further
reduced the Government’s stake to 17.7%. KCB is
listed on the Nairobi Securities Exchange, Uganda
Securities Exchange, Dar-es-Salaam Stock Exchange
and Rwanda Stock Exchange.
Ownership structure
The table below provides a breakdown of KCB’s
main shareholders as at end-December 2012.
Table 1: Shareholding composition %
The Government of Kenya 17.6
National Social Security Fund 7.7
Standard Chartered Nominees 12.8
CFC Stanbic Nominees 1.8
Other (less than 1.5%) 60.1
Shareholding profile %
Kenyan Individual Investors 27.0
Kenyan Institutional Investors 50.7
East African Individual Investors 0.1
East African Institutional Investors 0.2
Foreign Individual Investors 0.3
Foreign Institutional Investors 21.8
Source: KCB.
Strategy and operations
KCB’s operations are divided into four main business
units, namely, Corporate Banking, Retail Banking,
Treasury and Mortgage Finance. As at FYE12, the
Group had a total of 230 branches across its regional
footprint, up from 222 as at FYE11, as tabled below:
Table 2: Subsidiary Branches Subsidiary No. of branches
Kenya 173 Uganda 14
Tanzania 11 Rwanda 11
South Sudan 20 Burundi 1
Source: KCB.
The expansive branch network is complemented by
over 940 ATMs across the region. KCB also has a
well developed internet and mobile banking service
and over 2,600 agents.
Subsidiaries
KCB serves as the holding company of the Group’s
subsidiaries and associates, having established a
presence in five East African countries i.e. Kenya,
Tanzania, Uganda, Rwanda, South Sudan and
Burundi. KCB has 100% ownership in Kenya
Commercial Finance Company Ltd, Kenya
Commercial Bank Nominees Ltd, Kencom House
Ltd, KCB Tanzania Ltd, KCB Sudan Ltd, KCB
Rwanda, KCB Uganda Ltd, KCB Burundi Ltd and
45% ownership in United Finance Ltd.
To promote cross border trading, KCB Tanzania was
established in Dar-es-Salaam in 1997. In May 2006,
KCB Southern Sudan was established to provide
conventional banking services. KCB Uganda and
KCB Rwanda commenced operations in 2007 and
2008 respectively. In 2012, KCB opened a subsidiary
in Burundi. KCB Kenya is the flagship of the group,
contributing roughly 83% (FYE11: 85%) of total
group assets and 92% (FYE11: 93%) of the group net
profit before tax (“NPBT”) as at FYE12.
Governance structure
KCB (along with its subsidiaries) abides by the rules
on good corporate governance as set out by the
Capital Markets Authority in Kenya, the Central
Bank of Kenya (“CBK”), as well as the principal
bodies in each country of operation. A
comprehensive “Corporate Governance Policy” is in
place.
The Group’s directorate, as at 31 December 2012,
consisted of nine independent non-executive directors
(including the chairman) and two executive directors.
All banking subsidiaries are registered as legal
entities in their respective countries of operation,
each with its own board of directors. To ensure
uniformity, each country board has the same working
committees as its parent. The group chairman also
serves as a non-executive on the KCB Kenya, KCB
Sudan, KCB Uganda and KCB Rwanda Boards.
Financial Reporting
KCB’s financial statements are prepared in
accordance with International Financial Reporting
Standards (“IFRS”) and the Kenyan Companies Act.
Following a rotation of auditors, KPMG took over
from Ernst & Young during 2011, and have issued
unqualified reports for FYE11 and FYE12.
Operating environment
Economic overview
The East African economies remained resilient,
despite challenging macroeconomic conditions
characterised by high inflation rates, volatile
exchange rates and high interest rates. A real GDP
growth of 4.7% was recorded in Kenya, up from
4.4% in 2011, supported by improved weather
conditions and macroeconomic stability. The CBK
continued to enforce a tight monetary policy
Kenya Bank Credit Rating Report | Public Credit Rating Page 2

following heightened inflationary conditions which
were prevalent from the last quarter of 2011. Inflation
came down from a high of 19.7% y-o-y in November
2011 to 7.7% in July 2012 and 3% in December
2012 in line with the CBKs target range (5 ± 2.5%).
Monetary policy tightening succeeded in curbing
credit growth and reducing volatility in the interbank
market. Following its success against inflation, the
CBK reduced its policy rate from 18% in December
2011 to 13% in September 2012,11% in December
2012 and 9.5% in March 2013. The IMF estimated a
real GDP growth of 4.7% for 2012 (2011: 4.4%). The
Kenya Shilling has stabilised which had witnessed
significant volatility in 2011 depreciating by up to
30%, ranging between 83 - 87 to the US$ in 2012.
Macroeconomic indicators* 2010 2011 2012 2013f
Real GDP growth (annual% change) 5.8 4.4 4.7 5.9
Inflation (annual average % change) 4.1 14.0 9.4 5.2
Current account balance (% of GDP) (6.5) (9.7) (9.1) (7.4)
Total public debt, net (% of GDP) 44.7 43.6 43.2 42.9
*Refers to Kenya. f – forecast.
Source: IMF World Economic April 2013.
Estimated real GDP growth for 2013 is as follows:
Kenya - 5.9%, Rwanda - 7.6%, Tanzania - 7.0%,
Uganda - 4.8% and Burundi - 4.5%. The economic
outlook remains subject to risks arising from an
uncertain external environment, unpredictable donor
inflows and political stability.
Banking sector overview
As at 31 December 2012, there were 44 banks
operating in Kenya. The banking sector recorded
improved performance during the period ended
December 2012.
Table 3: Key industry indicators 2011 2012
Capital adequacy (%)
Capital adequacy ratio 20.0 23.0
Core capital/total deposits 16.0 17.0
Asset quality (%)
Gross NPLs/Gross loans 4.4 4.7
Net NPLs/Gross loans 1.2 1.7
Gross loans/net loans 58.9 57.1
Profitability (%)
ROaA 4.4 4.7
ROaE 30.9 30.0
Net Interest Margin 8.2 11.6
Yield on advances 12.2 16.6
Cost/income 47.4 40.1
Cost of deposits 2.8 5.9
Liquidity (%)
Liquid assets/total deposits 42.0 46.0
Source: CBK.
The sector registered a pre-tax profit of KShs107bn,
up 20.6% from the previous year (2011: 20.5%).
Total assets grew by 15.3% (2011: 20.3%) to
KShs2.3tn, while total deposits grew by 14.8%
(2011: 20.4%) to KShs1.7tn. Net loans grew by
12.5% to KShs1.3tn, compared to a growth of 31.4%
in 2011. The sector also registered strong
capitalisation levels on the back of retained earnings
and additional capital injection. However, asset
quality declined with the gross NPLs ratio increasing
to 4.7% due to the high interest rates. The table below
provides the key performance metrics.
Competitive position
KCB is the largest bank in Kenya with market shares
of 13.1% (F11: 14%) and 16.6% (F11: 14%) of total
industry assets and deposits respectively, as at 31
December 2012. Selected market share indicators for
the top 4 banks are shown below.
Table 4: Peer
analysis (KShs'm)
KCB* Equity Coop S/Chart
Total assets 304 112 215 829 199 663 195 493
Market share 13.1% 9.3% 8.6% 8.4%
Net customer loans 187 023 122 410 119 088 112 695
Market share 16.6% 10.9% 10.6% 10.0%
Customer deposits 223 493 140 286 162 267 140 525
Market share 13.1% 8.2% 9.5% 8.2%
*Refers to KCB Kenya. Source: CBK/Company financials.
Financial profile
Likelihood of support
Given government’s shareholding in the group
support is implied, however, to what extent this can
be relied on by the Group is somewhat speculative.
Funding composition
The group is predominantly funded through customer
deposits, shareholders equity and to a lesser extent
borrowings. Being a listed entity, the group can raise
additional capital through the equity market. Total
funding (excluding equity ) grew by 8.6% to
KShs306bn as at FYE12, compared to growth of 36%
in the previous period. The funding mix remained
largely unchanged, with customer deposits making up
a slightly higher 94% of the overall total.
Table 5: Funding base
F11
KShs'm %
F12
KShs'm %
Customer deposits 259 309 92.0 288 037 94.0
Government & parastatals 66 027 23.4 66 669 21.8
Private sector & individuals 193 282 68.6 221 368 72.3
Interbank borrowings 14 105 5.0 9 334 3.0
Long term debt 8 525 3.0 8 923 2.9
Total
By maturity
281 939 100.0 306 294 100.0
> 1 month 202 197 71.7 216 288 70.6
1-3 months 32 923 11.7 22 341 7.3
1-12 months 30 973 11.0 40 493 13.2
< 12 months 15 845 5.6 27 173 8.9
Total
Customer deposits
281 939 100.0 306 294 100.0
Demand 188 092 66.7 210 336 68.7
Term 71 217 25.3 77 701 25.4
Total
Source: KCB.
259 309 100.0 288 037 100.0
Customer deposits grew by 11% in F12,
comparatively lower than the average industry
growth of 14.8%. The deposit base is fairly
diversified, with the single largest and 20 largest
depositors constituting 2.5% and 22.7% of total
deposits respectively as at FYE12. Borrowings
mainly comprise a 7-year loan facility of US$100m
from the International Finance Corporation, at an
effective interest rate of 2.25%. A breakdown of
customer deposits by subsidiary is tabled below.
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Table 6: Contribution to F11 F12
depositor funding † KShs’m % KShs’m %
Kenya 210 174 81.1 223 493 77.6
Tanzania 8 427 3.2 9 802 3.4
South Sudan 27 434 10.6 38 583 13.4
Uganda 7 385 2.8 8 041 2.8
Rwanda 6 713 2.6 7 850 2.7
Burundi - - 580 0.2
Group elimination (824) (0.3) (312) (0.1)
Total 259 309 100.0 288 037 100.0
†Excluding borrowings. Source: KCB.
Capital structure
Total capital & reserves grew by 20% to KShs53.3bn
in F12 (FYE11: 13.4%), supported by retained
earnings.
Table 7: Capitalisation
F11 F12
KShs'm KShs'm
Tier I capital 38 403 42 125
Tier II capital 1 517 2 800
Total regulatory capital 39 920 44 925
Total risk weighted assets (“RWA”) 197 734 192 939
Key capitalisation ratios
Core capital: RWA (%) 20.7 22.7
Statutory requirement @ 8%
Total regulatory capital: RWA (%) 19.9 21.3
Statutory requirement @ 12%
Source: KCB.
The capital/assets ratio increased to 14.5% (FYE11:
13.4%). The total risk weighted capital adequacy
ratio followed a similar trend, rising to 21.3% on the
back of a decline in risk weighted assets.
Credit risk
Risk management
The Group’s board is responsible for the
establishment and oversight of the risk management
framework. Risk management is pursued through
board approved committees, namely: the Audit
Committee, Credit Committee and Risk Management
Committee.
Strategic overview
Total assets ( including contingencies) grew by 11%
to KShs498bn in F12 (F11: 31.6%), compared to an
average industry growth of 15%. The asset mix was
relatively constant for the year, although reflecting a
notable increase in funds allocated to Government
Paper.
Table 8: Asset mix
F11
KShs'm %
F12
KShs'm %
Cash & liquid assets 114 050 25.1 135 683 27.3
Cash 15 697 3.5 14 942 3.0
Balances with CBK 27 011 5.9 21 478 4.3
Balances with other banks 25 812 5.7 10 422 2.1
Government securities 45 530 10.0 88 842 17.8
Customer advances 198 725 43.7 211 664 42.5
Other investments 474 0.1 449 0.1
Fixed assets 8 018 1.8 8 896 1.8
Other assets 9 449 2.1 10 687 2.1
Contingencies 123 871 27.2 130 368 26.2
Total
Source: KCB.
454 587 100.0 497 747 100.0
Loan portfolio
The total gross loan book grew by a modest 6.5%
(F11: 20.1%) to KShs220.6bn, as the group focused
on bad debt recovery. The sectorial distribution of
loans remained largely unchanged with lending
activities targeted at corporates (39%) , followed by
microcredit (26%) and the construction sector (17%).
Table 9: Gross loan book
characteristics
F11 F12
KShs'm % KShs'm %
By sector
Construction 33 722 16.3 38 249 17.3
Micro credit 60 271 29.2 58 019 26.3
Agriculture 10 677 5.2 9 650 4.4
SME 22 506 10.9 27 909 12.7
Corporate 79 540 38.5 86 722 39.3
Total 206 717 100.0 220 550 100.0
Private sector/individuals 200 793 97.1 210 923 95.6
Government/parastatals 5 924 2.9 9 627 4.4
Total 206 717 100.0 220 550 100.0
By maturity
> 1 month 24 315 11.8 53 771 24.4
1-3 months 10 743 5.2 4 850 2.2
3-12 months 17 160 8.3 12 707 5.8
1-5 years 73 618 35.6 63 164 28.6
< 5 years 80 881 39.1 86 057 39.0
Total 206 717 100.0 220 550 100.0
Source: KCB.
A breakdown of gross loans & advances (by
subsidiary) is tabled below. Although decreasing
somewhat, the bulk of the lending activities takes
place in Kenya, accounting for 85% of gross loans as
at FYE12. The gross loan book in South Sudan
almost doubled in F12 to contribute a higher 2.5% of
the total loan portfolio, albeit from a very low base.
Table 10: Contribution to F11 F12
gross loans & advances KShs'm % KShs'm %
Kenya 179 844 87.0 187 023 84.8
Tanzania 6 702 3.2 7 803 3.5
South Sudan 2 850 1.4 5 575 2.5
Uganda 4 302 2.1 5 204 2.4
Rwanda 5 027 2.4 5 791 2.6
Burundi - - 268 0.1
Total 206 717 100.0 220 550 100.0
Source: KCB.
Asset quality
Arrears grew by 20.6% to KSh14.8bn as at FYE12,
as repayment pressure continued to drag on portfolio
performance. Consequently, the gross NPLs ratio
increased to 6.7%. Total provisions covered 60% of
the capital value in arrears, down from 65% in F11.
Cognisance is taken of the large amount of collateral
held against NPLs. However, the reality of long time
delays and the costs involved with converting
collateral into cash actually makes the bank less
protected against the fallout from defaulting clients.
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Table 11: Asset quality
F11
KShs'm
F12
KShs'm
Gross advances 206 717 220 550
Performing 194 488 205 799
Neither past due nor impaired 182 260 185 504
Past due but not impaired 12 228 20 295
Non-performing 12 228 14 750
Impaired 12 228 14 750
Less : Provisions (7 992) (8 885)
Individually assessed (6 466) (6 836)
Collectively assessed (1 526) (2 049)
Net NPL's 4 237 5 865
Fair value of collateral on NPLs 5 762 8 605
Loan write-offs 2 806 1 204
Loan recoveries 2 349 1 659
Gross NPL ratio 5.9% 6.7%
Net NPL ratio 2.1% 2.8%
Net NPL/Total Capital 10.8% 13.2%
Source: KCB.
Liquidity risk
From a systemic point of view, most emerging
market banks tend to have a particularly pronounced
negative (contractual) short term liquidity gap due to
the short term nature of deposits, largely as a result of
volatile interest rates, the lack of an extended savings
culture and low financial intermediation. However,
the trend of the mismatch over time, as well as the
size thereof, is important, since an increase in the
mismatch could indicate a potential funding problem.
KCB displayed a short term maturity mismatch equal
to 2.2x capital at FYE12, with 25% of advances
maturing within 30-days, compared to 74% of
deposits. In terms of behavioral maturity, however,
the bulk of deposits is rolled over and is relatively
stable. Given the scarcity of long-dated term deposits
in the region, the group’s ability to build a stable pool
of fixed rate funding is limited. Notwithstanding this,
the group is making efforts to diversify the funding
base through longer dated lines of credit. Liquid &
trading assets/total short term funding increased to
45.6% up from 41.7% previously, as the Group
slowed its lending activities. The ratio was well
above the prudential minimum of 20%.
Advances/deposits increased to 77% in F12 (F11:
74%), though remaining within the acceptable market
average of 80%.
Financial performance
A 5-year financial synopsis is reflected at the back of
this report, supplemented by the commentary below.
The Group’s net profit before tax (“NPBT”) grew by
13.7% to KShs17.2bn in F12, compared to growth of
54.4% in the previous period. The performance was
37% below budget. Net interest income grew by 28%
(F11: 22%) to KShs30.6bn, supported by higher
margins. The weighted average effective interest rate
on loans and advances increased from 12.7% in F11
to 18.5%, driven by the tightening of monetary policy
during the review period. In turn, non-interest income
grew by a marginal 1.5% (F11: 36.5%).
Consequently, net interest income contributed 70% of
total operating income, up from 64% in F11. Overall,
total operating income amounted to KShs44.1bn,
representing an 18.7% (F11: 26.5%) increase over the
previous period; operating expenses increased by a
comparatively lower 13.4% (F11: 18.6%) to
KShs24.8bn. Consequently, the cost/income ratio
improved to 56% from 59% previously. The bad debt
charge (income stateme nt/total operating income)
climbed to 4.8% from 0.4%, due to the significant
rise in loan impairments.
In terms of subsidiary performance, there was an
increase in the contribution from Kenya, Tanzania,
Uganda and South Sudan. Rwanda however,
recorded a loss in F12. Burundi, which commenced
operations in June 2012, also recorded a loss of
KShs59m in the same period.
Table 12: Contribution F11 F12
to after tax earnings KShs'm % KShs'm %
Kenya 14 074 93.0 15 772 91.7
Tanzania 47 0.3 139 0.8
South Sudan 864 5.7 1 352 7.9
Uganda 27 0.2 54 0.3
Rwanda 118 0.8 (50) (0.3)
Burundi - - (59) (0.3)
Total 15 129 100.0 17 208 100.0
Source: KCB.
Kenya Bank Credit Rating Report | Public Credit Rating Page 5

Year end: 31 December 2008 2009 2010 2011 2012
Income Statement Analysis
Inte re s t incom e 14 746 17 968 23 110 28 501 43 082
Inte re s t e xpe ns e (2 970) (3 500) (3 464) (4 616) (12 446)
Net interest income 11 775 14 469 19 645 23 885 30 636
Fe e a nd com m is s ion incom e 5 549 5 540 6 482 8 729 9 074
Tra ding incom e 1 629 1 648 2 775 3 608 3 688
Othe r incom e 475 937 426 881 661
Total operating income 19 428 22 594 29 329 37 103 44 059
Im pa irm e nt cha rge (1 409) (718) (1 118) (146) (2 098)
Ope ra ting e xpe nditure (12 006) (15 575) (18 413) (21 829) (24 754)
Net profit before tax 6 013 6 300 9 798 15 129 17 207
Ta x (1 822) (2 216) (2 620) (4 148) (5 005)
Net profit after tax 4 191 4 084 7 178 10 980 12 203
Balance Sheet Analysis
Subs cribe d ca pita l 9 516 9 516 21 516 21 860 21 892
Re s e rve s (incl. ne t incom e for the yea r) 11 571 13 054 17 614 22 505 31 448
Total capital and reserves 21 087 22 570 39 130 44 365 53 340
Ba nk borrowings (incl. de pos its , pla cements & REPOs) 38 506 6 668 11 057 14 105 9 334
Cus tom e r de pos its 126 684 159 732 191 016 259 309 288 037
Short-term funding (< 1 year) 165 190 166 401 202 073 273 414 297 371
Cus tom e r de pos its 7 3 297 5 959 - -
Other funding (> 1 year) 7 3 297 5 959 8 525 8 923
Pa ya ble s /De fe rre d lia bilitie s 4 928 2 510 4 195 4 412 7 745
Other liabilities 4 928 2 510 4 195 4 412 7 745
Total capital and liabilities 191 212 194 778 251 356 330 716 367 379
Ca s h in ha nd 4 909 7 067 10 010 15 697 14 942
Ba la nce s with ce ntra l ba nk 12 330 12 804 16 988 27 011 21 478
Fixe d a s s e ts 5 788 7 747 8 272 8 018 8 896
Re ce iva ble s /De fe rre d a s s e ts 7 324 8 952 7 654 9 449 10 687
Non-earnings assets 30 351 36 569 42 923 60 175 56 002
Loa ns & a dva nce s (ne t of provis ions) 93 522 122 659 148 113 198 725 211 664
Ba nk pla ce m e nts 42 175 9 068 10 211 25 812 10 422
Ma rke ta ble /Tra ding s e curities 24 706 26 120 49 811 45 530 88 842
Othe r inve s tm e nts 457 362 297 475 449
Total earning assets 160 861 158 209 208 433 270 542 311 377
Total assets 191 212 194 778 251 356 330 716 367 379
Contingencies 28 681 32 909 72 429 123 871 130 368
Ratio Analysis (%)
Capitalisation
Inte rna l ca pita l ge ne ra tion 19.9 18.1 18.3 24.7 22.9
Tota l ca pita l / Ne t a dva nce s + net equity invest. + gua ra ntees 17.2 14.5 17.7 13.7 15.6
Tota l ca pita l / Tota l a s s e ts 11.0 11.6 15.6 13.4 14.5
Liquidity
Ne t a dva nce s / Cus tom er de pos its 73.8 75.2 75.2 76.6 73.5
Ne t a dva nce s / Cus tom er de pos its + other s hort-term funding 56.6 72.3 71.2 72.7 71.2
Liquid & tra ding a s s e ts / Tota l a s s ets 44.0 28.3 34.6 34.5 36.9
Liquid & tra ding a s s e ts / Tota l s hort-term funding 50.9 33.1 43.1 41.7 45.6
Asset quality
Im pa ire d loa ns / Gros s a dva nces 0.0 88.9 9.2 5.9 6.7
Tota l loa n los s re s e rve s / Gros s a dva nces 8.9 7.4 6.7 3.9 4.0
Ba d debt cha rge (incom e s ta tement) / Gros s a dva nces (a vg.) 1.7 0.6 0.8 0.1 1.0
Ba d debt cha rge (incom e s ta tement) / Tota l opera ting incom e 7.3 3.2 3.8 0.4 4.8
Profitability
Ne t incom e / Tota l ca pita l (a vg.) 24.4 18.7 23.3 26.3 25.0
Ne t inte re s t m a rgin 8.7 8.6 10.2 9.9 10.6
Non-inte re s t incom e / Tota l opera ting incom e 39.4 36.0 33.0 35.6 30.5
Non-inte re s t incom e / Tota l opera ting expens es (or burden ra tio) 63.7 52.2 52.6 60.6 54.2
Cos t ra tio 61.8 68.9 62.8 58.8 56.2
ROa E 24.4 18.7 23.3 26.3 25.0
ROa A 2.7 2.1 3.2 3.8 3.5
Nom inal growth indicators
Kenya Com m ercial Bank Lim ited
(Kenya Shillings in millions except as noted)
Tota l a s s e ts 58.7 1.9 29.0 31.6 11.1
Ne t a dva nce s 45.5 31.2 20.8 34.2 6.5
Tota l ca pita l a nd re s e rve s 59.7 7.0 73.4 13.4 20.2
Cus tom e r de pos its 34.2 28.7 20.8 31.6 11.1
Tota l funding (e xcl. e quity portion) 64.7 2.7 22.6 35.5 8.6
Ne t incom e 40.9 (2.5) 75.8 53.0 11.1
Kenya Bank Credit Rating Report | Public Credit Rating Page 6

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Kenya Bank Credit Rating Report | Public Credit Rating Page 7