Joshua Oigara, the KCB Group’s chief executive, spoke to James Anyanzwa about the lender’s performance for this year’s first quarter, its growth plans and acquisitions in Rwanda and Tanzania
KCB recently released its financial performance for the first quarter of this year showing a growth in net profit by two percent. Considering the size of the bank and the impressive growth trend it has had in the past, is this performance to your expectation and satisfaction under the current operating environment?
I think based on the environment we are in today our results for the first quarter are lower than our expectations. Our plan is to grow our performance this year by between 12 and 15 percent and that is still our goal. We had a difficult quarter in terms of changing our organisation and also building recovery of some of the loans which had become bad last year.
But more importantly is expanding our balance sheet by 15 percent and these commitments are still there. So from an asset growth point of view, we have seen loan growth. Our interest income has gone up. Our fees and commissions was down by 20 percent, but we do expect to recover this year.
Yes, it is a difficult start for the year for us but we already have our plans on how to deliver our ambitions for the full year. There is huge opportunity for us to be able to grow this coming quarter and so our focus for the full year remains.
What do you intend to do differently to shore up your performance in the middle of this Covid-19 pandemic?
I don’t think the issue really is the pandemic because we have learnt now how to build up businesses strongly even in quarter four. You know when you have a difficult quarter it does not mean you have lost the year. We have a strong loan pipeline in our businesses today to be able to build growth in our businesses between 12 percent and 15 percent in terms of asset growth.
We see a lot of opportunities in our consumer business, personal, households, trade and manufacturing. We have now reinvented our payment platform, which will bring in new fees, new transactions and new deposits.
The biggest challenge was the Kenyan business. Our international businesses are up 15 percent year-on-year and that for me is commendable.
We would double up our businesses in Rwanda and Tanzania through the acquisitions we are making, which have already received shareholders’ approval, as well as building up recovery of some of our loans.
This year we anticipate to recover more than Ksh20 billion ($181.82 million) of our loan facilities.
What are the key priority areas for the bank’s recovery this year?
We are focused on four main priorities: Strengthening our asset growth this year by making sure that we take the benefits of the payment platform we have launched; consolidating the businesses we are acquiring in Rwanda and Tanzania and obviously being able to manage the recovery of our loan portfolio.
That I think is what will build our business to the 12 percent growth this year.
What is your performance outlook for the second quarter of this year?
Our full year outlook remains the same. We expect that our non-funded income ratio will come back to 33 percent, our deposit growth at 12 percent to 15 percent, our net interest income will remain at 8.8 percent, and our cost of risk will remain at 1.7 percent.
How are the regional subsidiaries performing?
Our regional businesses have performed better this year. Today, the contribution of the subsidiaries to the group’s total profit for the first quarter is 17 percent and that for me is what I think is valuable for our businesses.
It is a 28 percent growth year-on-year and that is even before we bring in the acquisition in Rwanda and the acquisition in Tanzania. All our businesses in Tanzania, Rwanda, South Sudan, Burundi and Uganda are performing much stronger than they were last year.
What prompted you to increase your shareholding in the acquisition of Banque Populaire du Rwanda Plc (BPR) to 100 percent from 62 percent?
There is no change in the strategy for Rwanda. We always aimed to buy 100 percent of the Rwandan bank from the beginning. That has always been the plan.
So what changed is initially we had one shareholder (Atlas Mara) who was selling 62 percent, but there are many other shareholders. So 100 percent has always been the agenda and nothing has changed. What you saw last year was us signing an agreement with one partner.