Why is NIC Bank rebranding?

By JAMES ANYANZWA

It doesn’t happen too often, but sometimes a product or service becomes so successful, that it eventually overshadows the main brand.

That is what happened when NIC Bank launched its retail banking service, branded ‘Move’, five years ago, when it was targeting a more youthful cadre of savers.

The shouting colours and logo of the Move service adorning its automated teller machines (ATMs) and customer service centres were so eye-catching, it was hard to remember the NIC brand.

Now, after a successful Sh1.2 billion rights issue last year, the NIC Bank is implementing another ambitious re-branding of its retail banking business that seeks to reconnect Kenyans to the corporate brand, and fight off growing competition.

It hopes that the multi-million shilling three-year project will revitalise the waning popularity of the ‘Move’ account, and tighten its grip on the asset finance business that is quickly sliding to competitors.

"We are re-launching our retail banking business, because we have known it to be the most competitive segment," James Macharia, the bank’s managing director told the Financial Journal (FJ).

The NIC Bank’s Move account was initiated in November 2003, with a prime aim of pulling in young professionals, and the newly employed.

While the product hit the market during the first two years of its launch, it eventually turned out to be an image problem for the mother brand.

Although everyone appeared familiar with Move , not as many linked the brand to NIC Bank.

While the bank’s top management has so far expressed reservations about the product, and its impact on future growth of the bank, the idea of scrapping is still a bitter pill.

"Move was our vehicle for entering the retail market. However, Move has overshadowed the main bank. That was not entirely advantageous," Macharia was quoted saying in 2006.

While the bank has indeed cut down on promoting Move, and resorted to co-branding it with NIC’s logo, Macharia insists that the bank harbours no intentions of phasing it out. Instead, he says, the facility would be ’re-energised’ to pave way for new products and services.

"We did not intend to scrap it, because it did very well in terms of positioning the bank in the overall banking sector," Macharia told FJ in an interview.

He contends that revival of the Move loans package, whose declining fame has so far elicited public debate, will facilitate an accelerated rollout of new products and services.

Already, he says, a new director has been installed to take charge of the division and to oversee its restructuring pursuits.

INDIGENOUS

NIC, which started its operations in 1959 as a non-bank financial institution, is an indigenous mid–tier bank, with a capitalisation of Sh4.3 billion after its rights issue, that raised its shareholders’ funds by Sh1.2 billion last year.

The bank, which ranks among the top 10 in capitalisation, is also keen to repossess its asset finance customers (currently banking with other banks) under the medium- term expansion programme, that is intended to add at least 20 more branches to its network.

This expansion will see the bank spread its tentacles out of Nairobi, Mombasa and Nakuru, where its 12 branches currently have a presence.

"The whole purpose is to reach out to our asset finance customers.

Historically we have been a market leader in this business, but those customers have been banking with other banks," says Macharia Last year, the bank issued Sh.1 billion worth of Rights, by offloading an extra 16.5 million shares onto the market, which was oversubscribed by 49 per cent.

Macharia says that the proceeds of the issue will partly be used to fund the bank’s expansion, and shore up its capital base.

The success of the issue also prompted NIC to enter the stockbrokerage business through its acquisition of a 55 per cent stake in the then struggling Solid Investment Securities.

The decision was reached after the Bank lost an Sh180m bid to buy a seat on the Nairobi Stock Exchange (NSE) that was vacated by the collapsed Francis Thuo Stockbrokers. "It has been very good for us. It is something that was timely, and there are no regrets," says Macharia.

Other local commercial banks with investment banking arms include Barclays Bank (Barclays Financial Services), Commercial Bank of Africa (CBA Capital) and CFC Bank (CFC Financial Services).

NIC bank’s restructuring of the brokerage firm that ended in June 2008 saw its shareholders inject an additional Sh300 million in fresh capital into the institution.

"The shareholders of the bank have recapitalized the brokerage firm to the tune of Sh300 million," says Macharia. "The bank is getting new customers through the brokerage division."

BROKERAGE

He says that the additional capital will be used to acquire new systems, and enhance the capacity of the brokerage division, in order to carry out more business.

NIC Bank posted a pre-tax profit of Sh1.05 billion for the nine months ended September 2008, representing a growth of 43 per cent, compared to the Sh733 million reported for the same period last year. The profit after tax was Sh735 million. The bank attributed the sustained growth in profitability over the years to a strong financial and operational performance.

Those results were achieved despite the ongoing strain on global financial markets, the post-election upheavals, and increased inflationary pressure.

"We are more selective in terms of our international counterparts," says Macharia, adding: "Because we are operating in global financial markets there are bound to be some limited impact."

The bank’s total operating income rose 29 per cent (Sh507 million) on the back of improved non-funded income, which grew 45 per cent (Sh246 million).

Net interest income, however, increased 22 per cent (Sh261 million).

Operating expenses outside provisions for loan losses grew by 15 per cent (Sh135 million) in spite of high inflation.

The bank’s loan book recorded a 44 per cent growth (Sh9.0 billion) to Sh29.3 billion by September 2008, underlying the bank’s expanding market share, and its capacity for bigger deals.

NIC’s deposit base, as at September 2008, stood at Sh32.1 billion, a 25 per cent increase over June last year.