Barclays restyles with SME drive to reverse profit slump

By James Anyanzwa

Kenya: Barclays Bank of Kenya has embarked on a major transformation process in the hopes of restoring its fading glory in the banking sector.

The bank, which saw its profitability slump 14 per cent in the full year period ended December 31, 2013, is now restructuring its business units with a view to diversifying into new revenue streams.

The new income streams include the Small and Medium Sized Enterprise (SME) sector and investment banking business.

The latest move comes amid shrinking revenues, ballooning costs, low deposit growth, increase in loan provisions, high labour turnover and a decline in shareholders’ earnings.

Analysts at Standard Investment Bank warn that Barclays could continue trailing its peers in terms of earnings and asset growth. In a market report last week, the analysts cautioned investors against selling the bank’s stock, which closed on Friday at Sh17.60 per share.

“Though the 2013 financial year earnings performance was lower than expected and our forecasts show BBK will continue to lag the sector in earnings and assets growth, we retain our “Hold” recommendation,” said the investment bank.

“While over the past four years BBK has lagged the sector in deposit growth, this has in no way disadvantaged the bank since it still boasts of sourcing 68 per cent of its deposits from the retail segment,” it added.

Barclays, whose market capitalisation stands at Sh95 billion, saw its profit before tax (PBT) fall to Sh11.13 billion from Sh13.02 billion the previous year.

This year, the bank’s management expects to spend more on improving brand visibility and investing in new technology to drive both improved customer experience and acquisition, given its large middle-income client base.

The management is also confident that customers will quickly embrace new technology-based service delivery solutions.  

“We are now starting to invest in diverse income streams. We have not in the past been playing in the SME space. There are a lot of opportunities that we need to exploit,” said Mr Jeremy Awori, the bank’s managing director, adding that, “As Barclays, we are on a journey to being the  ‘go to’ bank.

“We have focused on getting closer to our customers and offering them our experience through opening of new outlets. There are significant opportunities for growth in retail, business banking, corporate and Treasury,” he said.

According to the SIB analysts, BBK delivered the lowest shareholder returns at 11.7 per cent in 2013. This, they point out, compared unfavourably with its peers such as CFC Stanbic Bank, which gained the most (107.1 per cent).

Barclays’ growth in corporate liabilities outpaced retail deposit growth at 11.6 per cent and 9.6 per cent, respectively. During the nine-month period to September 30, 2013, Barclays’ earnings per share (EPS) declined by 10.2 per cent.

On the other hand, CFC Stanbic Bank gained 52.4 per cent, Co-operative Bank 17.3 per cent, Equity Bank 7.3 per cent, Kenya Commercial Bank 15.4 per cent and Standard Chartered Bank 5.8 per cent.

Mr Awori, however, remained optimistic that the bank’s turnaround is imminent.

“The year 2013 was a year of consolidation, a year of investment. It was a year of really investing and building momentum as we look into stronger growth in the future,” he told an investor briefing in Nairobi last week.

“Going forward, we see great opportunities for our business. We shall maintain our holistic approach of focusing on innovative technology-based products, as well as capitalising on our group expertise in specialised industries.”

Barclays, which has 120 branches countrywide, is also eyeing opportunities in the lucrative oil and gas sector.