Corporate IV: KCB

Kenya: Kenya Commercial Bank, one of Kenya’s best-performing banks, is betting on technology and regional expansion to shore up its profits. We spoke to Chief Executive Officer Joshua Oigara on the group’s recently released 2014 financials, its strategy going forward and outlook for the 2015 financial year. Excerpts:

What were some of the key performance drivers in 2014? How come you lost the top position on the profitability table?

We are excited about one of the best performances for the bank in many years, especially when looking at loan-growth numbers. We have also seen a dramatic change in our costs efficiency and customer numbers during the past financial year.

Our business is still ahead in terms of returns on assets and equity, as well as efficiency. Although South Sudan has been a difficult market, down 25 per cent, we have made adequate provisions against its non-performing loans portfolio.

We lost our pole position to competition, which had an exceptional item on their books. We shall also have this exceptional item when we complete the process of forming a non-operating holding company. Plans are at an advanced stage and all approvals should be ready by July.

KCB engaged the services of global consultancy firm McKinsey in 2011. What are some of the positive outcomes of the restructuring process so far?

We have increased our customer numbers and become more efficient. The contribution of international business has also increased and we are now moving into the digital payments space where we plan to have over 10 million customers on the KCB-M-Pesa account platform by the end of this month.

What are some of the plans you have in store for the cashlite space?

We are in collaboration with Safaricom, the largest player in the mobile services business, and will be using the mobile phone as a key catalyst to grow our loan book and lower our cost/income ratio to below 50 per cent. The bank expects to generate more volumes and customer numbers through this partnership.

KCB is now offering stiff competition to micro-lenders with its competitive rates of 2 per cent, 3 per cent and 4 per cent for a loan accessed through the M-Pesa platform for repayment periods of six, three and one month, respectively. The loans are affordable, flexible and accessing them does not require one to physically walk into a branch.

A number of commercial banks have already lowered rates on their unsecured loan products. What are your plans as far as offering affordable credit is concerned?

We are presently offering one of the lowest rates in the market at 15 per cent, which has remained consistent over the past two years.

Interest rates have remained static and high because of a number of other factors, such as legal fees, collateral and Government borrowing needs. I believe we offer some of the most competitive rates on loans and a mortgage rate of 12.9 per cent, the best in the market.

The bank is making huge bets on technology to drive up profit. What plans do you have to exploit this platform?

We already have a presence in the public transport sector with the Pepea Card. Eventually, we intend to inter-connect the electronic payment platform with all retail channels. The digital payments platform is more efficient and much safer, hence its appeal. We shall also be building one credit history based on our customers’ usage of the M-Pesa platform to determine how much one is able to access in terms of credit.

Further, we are already looking at opportunities offered by e-Government.

Why the interest in the annuity project?

We believe that there is huge business in financing of infrastructure projects, such as roads, energy, roads and railway line construction, and we are building up our share. This is a better model that will unlock funds needed for the projects, estimated to cost Sh200 billion, cash that cannot be sourced from one single financier.

What is the outlook for your regional business? Any new expansion plans?

South Sudan remains a key area of concern for us, as well as the upcoming general elections in Tanzania and Burundi.

We are already looking at new markets, such as Somalia, Ethiopia and the Democratic Republic of Congo. But we are not intending to go into any of these markets soon, at least not this year.

Do you plan to move your headquarters to the ultra-modern KCB Plaza in Nairobi’s Upper Hill?

We are not moving from the iconic Kencom House offices. What we shall be doing is transferring some of the group’s functions, such as the shared services centre to be used by the six East African subsidiaries, to these offices. The building is owned by the bank’s pension fund and we shall only be taking up some space there.