18 November 2010

Rwanda: KCB Forecasts Huge Operating Loss

Kenya Commercial Bank (KCB) Rwanda, a subsidiary of the Kenya-based KCB Group, has said it will incur a huge loss this year, the biggest ever on account of high start up costs.

The Bank says it has invested approximately $13 million in terms of fixed assets, staffing, training and paying costs related to its green field operations, launched in 2008.

"We are coming to the end of the first year of full operation. This year we expect to report a bigger loss than last year, purely because of that (investment). We believe it is the biggest loss we will ever report," Maurice Toroitich, the Managing Director of KCB told Business Times in an interview on Monday.

Without revealing the exact amount of the anticipated loss, Toroitich said he was optimistic the bank, which currently operates 9 branches with about 220 staff will grow its revenue to become profitable in the coming years.

"Going into next year; we expect burying the impact of inflation and issues around additional infrastructure-mobile phone technology and expanding Automated Teller Machines (ATMs) network-we anticipate that our cost will remain where we have seen it this year- stable," he said.

In the first half of 2010, KCB reported a net operating loss of Rwf690 million.

Despite the loss in net earnings, the bank registered significant growth with total assets increasing by 60 percent to Rwf25 billion compared to Rwf16.1billion, for the whole of last year for the period under review.

"We will concentrate on building income, improving our customer base, offering new products and generating more transaction volumes from customers. That way, next year should be comfortable."

Toroitich said they will focus on enhancing the Small and Medium Enterprise (SME) banking products as part of the bank's strategy to increase its competitiveness in Rwanda, where 95 percent of businesses are SMEs.

"The corporate sector in Rwanda is small; it's not really an area where you want to break your neck. Our focus is to develop and grow the SME sector because the market is deeper and you have stronger impact on the economy, he said."

Early this year, the bank launched a financing scheme for SMEs through a new product known as 'Biashara Banking Services'.

"We believe there is a strong need for capacity building in the SME sector; we certainly do not have that capacity as a commercial bank but what we have decided is to partner with International Finance Corporation (IFC) to be able to bring them up into a bankable situation."

KCB Group is the largest bank in the region in terms of asset base topping $2.8 billion (Rwf1.6 trillion) with over 206 outlets across East Africa.

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