Diversified business model pays off for FD David Abwoga

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At a recent financial results briefing, David Abwoga, the director of finance of NCBA banking group, celebrated the contribution of the banking group’s subsidiaries outside of Kenya to the group’s profit after tax.

At a recent financial results briefing, David Abwoga, the director of finance of NCBA banking group, celebrated the contribution of the banking group’s subsidiaries outside of Kenya to the group’s profit after tax.

“Our diversified business model continues to demonstrate growth and resilience, with a strong contribution from our regional banking subsidiaries year-on-year. Our focus on enhancing the contribution from our subsidiaries has demonstrated success with our subsidiaries contributing 15 percent to group profit before tax during the year ended 31 December 2023, up from 2 percent in the previous period,” he said.

“We organise our business into three divisions. The first is our core banking subsidiaries in Kenya, Uganda, Tanzania and Rwanda. Second are our digital banking subsidiaries in the four East African countries and in Ghana and finally our non-banking subsidiaries comprising the investment bank, insurance agents and leasing. The businesses registered a combined Ksh21.5 billion profit after tax in 2023, which is a 56 percent increase from the prior year,” he added.

NCBA group continues to demonstrate strong fundamentals with positive compound annual growth rate in recent years. Customer deposits increased by 15 percent to Ksh579 billion and gross loans grew by 20 percent to Ksh370 billion. Customer growth and retention efforts are driving mobilisation, while balance sheet optimisation efforts are growing the group’s deposits base.

“Our customer growth agenda has seen us increase our lending substantially,” David noted. “We have well controlled risk outcomes with our non-performing loan (NPL) ratio edging down from 12.7 percent to 12.1 percent. We have had to write off about Ksh12 billion in loans due to prudential requirements and reaching settlements in certain legal proceedings. For a majority of the write-offs, we continue with our recovery efforts and expect to claw back more than half of the amounts.”

The NCBA group’s franchise strength has supported growth in foreign currency deposits and transactional volume growth has shored up non-interest income. Despite the pressure arising from cost of funds, the group managed to have an uplift in net interest margin.

“Our strategy is delivering the desired return outcomes for a Tier 1 bank and we are delivering consistent cash returns to our more than 27 000 shareholders over the past three years. Our dividends per share is now Ksh4.75 with Ksh7.9 billion distributed to shareholders from our 2023 profits. At 24.1%, we are delivering on our promises on return on equity while matching similar sized peers on return on assets at 3.1 percent,” David concluded.

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