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KCB honcho Paul Russo: How I'm writing the next chapter for the bank

KCB Group CEO Paul Russo during a one-on-one interview on banks' performance. [Wilberforce Okwiri, Standard]

New KCB Chief Executive Paul Russo has a deep respect for his predecessor, Joshua Oigara, whom he describes as “an amazing boss”.

But it is time to move away from the shadow of his mentor as he leads the region’s second-largest bank to the next level of growth. “I personally talk about writing the next chapter,” Mr Russo said in an interview with Financial Standard following the release of KCB’s half-year results on Wednesday last week.

At the heart of this chapter will be the term ‘execution.’ He wants to get things done. And with speed.

Mr Russo, a human resource practitioner who was previously the chief executive officer of National Bank of Kenya (NBK), a subsidiary of KCB Group, admitted that he was releasing Mr Oigara’s results.

“The results are looking good. You can’t just come here and take credit,” he said, pointing out that Mr Oigara was CEO until August 25.

Chase Bank

The two have worked together for eight years. He says Mr Oigara gave him the opportunity to go to Chase Bank. “I wouldn’t be where I am if it was not for Joshua.”

Witty and full of humour, Mr Russo is not under any illusion that it will be a smooth sail for him.  “The most challenging thing is to write a chapter after reading a good chapter.”

That, he says, could easily raise questions as to whether he could fit into the big shoes of his predecessor.

He is a good storyteller and flawlessly uses anecdotes more than numbers in his presentation to drive his point home.

He is perhaps the first HR manager to rise to the top of a tier-one bank.

Being at the top does not need to be lonely. “A CEO is about co-creation, there is nothing you do as a CEO on your own,” he says. “You have a team of experts. In fact, you are judged and challenged on how you bring those experts together.”

In writing his chapter, Mr Russo intends to employ a three-pronged strategy. The first one is customer obsession. “Every single thing you do as a staff is about the customer.”

He says in the last 90 days since he took over the corner office at Kencom Building, he has been seeing customers. “If you are obsessed about the customer, you will do things right. You will do things now, not tomorrow.”

The second is the culture of the organisation. He wants to change the organisational culture at KCB to make the lender nimbler and faster in its service delivery. “I need to infuse some hunger,” the CEO says.

He has already met all the branch managers of both KCB Kenya and NBK and from the meetings, he has kept a database of all the issues the branch managers raised. “I can’t tell you to be hungry, to go for it, and I have put roadblocks.”

The third one, and perhaps the most critical, is execution. “If I give you what you need, then do it.” “Execution requires you to be bold, (it) requires you to give the people the mandate to do their job without fear.”

He likes it when people take risks rather than be complacent. “Just get out and do it. Chances are that you will not get it right, but you will learn from the mistakes.”

One of the areas Mr Russo wants to address is bringing down the high levels of non-performing loans (NPLs) - credit facilities that have not been serviced for more than three months.

KCB’s stellar results, where the lender made a net profit of Sh19.6 billion in the first half of 2022, were blighted by a jump in the ratio of NPLs to total loans to 21 per cent.

Investor briefing

This NPL ratio is higher than the industry ratio which is at around 15 per cent. “This is the highest it can be. I have worked through my projection and I’m very sure we will be within the 15 per cent to 17 per cent range the next time we meet,” the CEO said during the investor briefing in Nairobi.

It is not the first time KCB has made this commitment, yet the NPL ratio has barely improved with the lender entangled in cash-strapped businesses such as Mumias Sugar, which owes them close to Sh3.5 billion. 

Mr Russo says the NPLs are legacy, old names. One of the ways he wants to manage the bad loans is by taking the hand of the distressed borrowers and walking with them; to help them with working capital. It might be a client engaged in a truck business whose operations have been disrupted by the Standard Gauge Railway, for example. “It is not a bad client. It is only that the situation has changed.”

Such a customer needs money that is cheaper, he says. And while KCB might not be in a position to get them the money, they can get people from outside to give money to the client through KCB Capital, an investment arm of the bank.

“It can either be that they take a stake or they can use instruments like letters of credit to help the client come out of the woods.

“Here is where execution comes in. if you delay without diagnosing and finding the right medication for that client, you will find by the time you find a solution, they are dead.”

Still using the example of transport business that has been disrupted, the customer might need to shift their business away from Mombasa to Nairobi route to maybe from Nairobi to Uganda or other routes.

Mr Russo is occupying the C-suite when KCB has made forays into the Democratic Republic of Congo (DRC) with the acquisition of a majority stake in Trust Merchant Bank - months after its competitor Equity had made an incursion into the lucrative market.

East African Community

Does he feel that KCB is playing second fiddle? “There will be a lot of Kenyan banks in DRC.”

The opportunities in the mineral-rich country that recently joined the East African Community are immense, he says. “But you must always ask yourself: What core competencies are you transferring? “ “The way I view it is what opportunities are there for me in DRC, noting that even before they acquired a local bank, they had clients in DRC.”

 “I think it is about how you deliver your competencies and how you leverage those competencies” Although a big chunk of the NPLs in the first half of 2022 came from the Kenyan subsidiary, Mr Russo sees KCB Kenya playing a critical role in its regional business.

“People think otherwise. But most important for us is Kenya playing a bigger role to lift up the businesses in the region.”

“If you check most of the manufacturing companies in Rwanda, they syndicate with KCB Kenya. I don’t need to capitalise Rwanda to be able to book that facility,” he says, adding that the same is true with sugar companies in Uganda.

 “In the end, it is the group. We don’t report subsidiary numbers; we publish group numbers.”

Save for Ethiopia, there is no other country in the region they would get into. “What you need to be careful is that we are a listed company and we are deploying shareholder funds. We must demonstrate returns on the investments that you have made,” he noted.

Other than TMB, KCB also acquired NBK and BPR Bank Rwanda. “There is only X amount of competencies you have to be able to integrate also and make money going into new markets.”

And he reckons their investments have started paying off with BPR growing its profitability.