Micro-lender Family Bank has emerged as one of the biggest beneficiaries of the ongoing restructuring at rival KCB.
It has hired Mr Peter Munyiri as the new chief executive in a move that is expected to give it the strategic shift it needs to become a worthy competitor to the industry's top dogs. Mr Munyiri, who left KCB in unexplained circumstances 12 days ago, had served as the deputy chief executive until last month when he was appointed to the newly created position of chief business officer.
His exit from KCB came only five days after the bank's board announced a new team of executives it had recruited internally as it embarked on the third phase of its restructuring.
KCB, which is Kenya's largest bank by assets is executing one of the biggest corporate re-organisations in the history of the banking sector following recommendations by international consultancy firm McKinsey, to help cut its operational expenses.
The restructuring, announced on May 17, saw 10 senior executives exit the bank as the lender cut its executive committee to seven members from 22 and scrapped the positions of deputy CEO - formerly held by Mr Munyiri and Samuel Kimani.
Sources within Family Bank and at the Central Bank of Kenya - the banking sector regulator - confirmed Mr Munyiri's appointment that is expected to be officially announced this morning.
He takes over from Peter Kinyanjui, who has been with the bank since 2005. It was not immediately clear whether Mr Kinyanjui has left the bank or continues to work in a different position.
Mr Munyiri declined to comment on the appointment, but analysts said his move to Family Bank is critical to preparing the lender for listing at the Nairobi Stock Exchange (NSE) besides strengthening its corporate governance structures and helping the Titus Muya family to let go of its firm grip on the bank.
Family Bank, which is ranked 21 among Kenya's 45 banks in terms of total assets, has made public its ambition to break into the league of top 10 lenders in Kenya.
Mr Munyiri is expected to help the bank realise that vision by aggressively pursuing growth in the retail market while seeking a slice of the corporate market that is currently dominated by big banks like Barclays, KCB, and Standard Chartered.
"Family Bank can only break into the top league by deepening its share of consumer banking market to grow its loan book and interest income and Mr Munyiri's experience at KCB should come in handy," said Mr Robert Bunyi, of Mavuno Capital.
Mr Erick Musau, an analyst at African Alliance, said picking an executive from a top rival is an indication that Family Bank is seeking someone to shepherd its planned debut on the stock market.
Mr Musau, however, added that Mr Munyiri will have a tough job growing Family Bank into the league of Kenya's top 10 lenders in the medium term as envisaged by its anchor shareholders. "It won't be easy in the emerging business environment where interest rates are rising and the economy is under pressure from high inflation, a weak Shilling and looming political shocks," he said.With inflation standing at double digits level, commercial bank lending rates have started rising in tandem with the coupon rates on short term government debt papers.
Commercial Bank of Africa (CBA) last week raised its base lending rate to 14.5 per cent from 13 per cent effective on shilling denominated loans, a signal that banks are looking into ways of protecting their margins from rising inflation.
Family Bank posted a net profit of Sh391 million last year compared to Sh220.9 million the previous year, a 77 per cent increase it said had mainly come from a rise in income from loans and investments.
The lender has an estimated 728,388 customers largely made up of micro-savers. Family Bank has in the past few years made clear its intention to list at the NSE, but it is yet to make concrete moves to that effect.
The bank has said it plans to sell between 25 per cent and 30 per cent of its stake to the public in an initial public offering (IPO) that should give it more muscle to expand its branch network and lending book.
Mr Munyiri is an experienced banker who has held executive positions at Barclays, Standard Chartered and Co-operative banks.
Family Bank last year tapped a Sh1 billion capital injection from development finance institutions FMO (Netherlands), Norfund (Norway), and private equity firm AfricInvest to boost its lending to small and mid-sized businesses. The deal, which gave the new investors a 24 per cent stake in the bank, also came with technical assistance and opened up new opportunities for accessing cheap international credit lines.
Family Bank has 54 branches and is expected to open more outlets and ATM points to expand its reach. The bank has also been eyeing the regional market for growth and has invested heavily in a new core IT system in readiness for a big leap into internet and mobile banking products that are emerging as major growth and cost-cutting areas in the banking sector.
At least 33 out of the 43 banks in Kenya have rolled out internet banking products to provide a seamless round the clock service to customers. The lenders have also introduced mobile banking platforms that are aimed at tapping transactional income from the vibrant domestic cash transfer market that handles more than Sh1 billion in a day.
Besides improving customer convenience, these new products have also reduced the length of queues in banking halls and cut down on paperwork and employee hours.
A stronger Family Bank is expected to raise the stakes in the lending market where top players such as KCB, Equity Bank, Barclays and Standard Chartered are aggressively seeking to expand their share of the SME lending market with newly acquired funds.
Kenya's top four banks have all fundraised in the past couple of years using a range of methods that have included support from parent firms, use of bonds to tap into the capital markets and rights issues.
"We expect a more aggressive Family Bank to further drive up competition in the overall banking sector," Mr Bunyi said. The bank, which shares a similar growth history with the highly successful Equity Bank, more than doubled its net earnings to Sh391 million last year from Sh167 million in 2007. Its net loan book more than tripled to ShSh10.2 billion from Sh4.1 billion in a similar period.