KCB secures $150m loan for mortgage borrowers
A teller attends to a customer. KCB- Kenya’s biggest lender by assets and profitability- was Kenya’s most profitable lender in 2012 having made Kshs12.2 billion in after-tax profit. PHOTO BY FAISWAL KASIRYE.
What you need to know:
The facility will bridge the mismatch between the short-term nature of customer deposits and the growing demand for long-maturity loans.
KCB Group mortgage borrowers and SMEs in Uganda and other East African countries stand to benefit from a $150 million loan, giving it an edge over rivals who have to pay higher interest on deposits.
Financed by International Finance Corporation (IFC), this will be the second such concessionary credit facility for the bank, which is Kenya’s biggest lender by assets and profitability.
The World Bank’s private lending arm, IFC, has revealed details of the proposed seven-year loan amounting to $150 million (Sh12.9 billion) in a disclosure note .
IFC says the loan will be used for “increasing access to finance and extending tenors of credit facilities to a number of key sectors for the economy namely, SMEs, agribusiness and housing.”
In August 2011, KCB got Kshs9 billion ($105 million) from the IFC.
KCB repays the loans at a small premium above the London Interbank Offered Rate (Libor).
The medium-term facility will give KCB room to lend long-term, helping to bridge the mismatch between the short-term nature of customer deposits and the growing demand for long-maturity loans.
“The loan would allow the bank and its subsidiaries to extend the tenor of its facilities, targeted at a number of priority sectors, without introducing unsustainable maturity mismatches into the balance sheet,” says the disclosure note.
CB’s loan book stood at Sh211 billion as at the end of 2012 up from Sh198 billion a year earlier reflecting a 6.5 per cent growth.
Maintaining profit growth
Analysts said that for the lender to maintain its profit growth momentum it has to give more long-term loans.
KCB was Kenya’s most profitable lender in 2012 having made Kshs12.2 billion in after-tax profit compared with Kshs10.9 billion in 2011, an 11.9 per cent increase.
“They need to be more aggressive in lending, it is critical that they match long-term lending with long-term funding,” said Faith Atiti, a research analyst at NIC Securities.
Short-term customer deposits are expensive to maintain and banks have been reaching out to lenders such as IFC who have the capacity to give long-term, large loans at low rates.
Housing Finance (HF), Equity, Co-operative, Gulf Bank have also borrowed from the IFC.
