Expanded products range and an estimated 28% growth of the loan book propelled Bank of Kigali (BK) to its highest profit levels ever, raking in net income of Frw 6 billion in the first half of the year alone.
The 2012 half year net income is just Frw 2.7 billion shy of the Frw 8.7 billion that the bank made in 2011--an indication that BK is close to double its profits at year end.
James Gatera, the chief executive officer told a media briefing last week that he thought it was "safe to assume" that the bank would replicate similar results in the second half. Should this happen, then BK will post net income of above Frw 12 billion at the end of 2012--a year the central bank says has seen tremendous growth in the banking industry.
Total bank assets in the country are now at over Frw 1.2 trillion while total loans and advances jumped from Frw 631.2 billion in December 2011 to Frw 744.5 billion as of June this year.
BK, the country's biggest commercial bank by assets, loaned out Frw 143 billion--a 28% rise from 111.3 billion lent out during the second half of 2011 while customer balances and deposits grew by 19 per cent to Frw 209 billion, according to figures released last week. The bank's total assets went up from Frw 246.5 billion to Frw 313 billion--a 27% increase from the first half of 2011.
BK's loan book is still dominated by corporate borrowers who account for Frw 102.3 billion--having risen 13% from Frw 90.5 billion in the first half of 2011. Retail loans, although up by 85%, accounted for only Frw 47 billion.
There was significant rise in retail deposits from Frw 45.2 billion of the first half of 2011 to Frw 62 billion--a near 38% rise perhaps boosted by previous investments new products aimed at reaching millions of unbanked Rwandans.
"If you are our customer, you no longer need to go to the banking hall to transact unless when you just want to come as say hallo to us," Gatera
This year alone, the bank opened 12 new branches, installed 13 new automated teller machines most of which can now accept deposits. The bank also launched its MPAY, a product that enables clients to pay for goods at selected retail outlets through their phones.
Gatera said that the bank is currently testing another product--agency banking -that is expected to take services closer to more people. Several small business operators, he said, had signed up to partner with BK to offer the services. With agency banking, customers who are far from any bank branch will be able to deposit and withdraw cash from their nearest agent. Together with deposit-taking ATMs and the soon-to-be introduced mobile bullion vans, this will make it possible for BK to take banking services to whoever needs them.
"If you are our customer, you no longer need to go to the banking hall to transact unless when you just want to come as say hallo to us," Gatera said.
BK is the market leader in Rwanda by assets and controls about 32% of the total market share.
The only indigenous bank listed on the Rwanda Stock Exchange, BK shareholders this year earned Frw 4.3 billion in dividends--just half of the profit made during the previous year after the board approved 50% dividend payment policy for three years to allow some of the profit to be re-invested in the business.
According to Gatera, plans to expand services to neighboring countries will kick off with the opening of a representative office in Nairobi, Kenya before the end of the year. Plans for a similar facility in Uganda may be altered because of absence of an enabling legal framework. Instead, the bank may consider applying for a license to open branches in Uganda, he said.
In a move that is likely to boost the bank's image, financial market analysts at Renaissance Capital recently upgraded the rating of BK shares at the Rwanda Stock Exchange to a "Buy" from "Hold."
"In a country with nine licensed commercial banks, BK has commanded a fair share of the market for several years. It is clear from its strategy update that the bank's goal is to dominate the Rwandan market and create as little room as possible for encroachment on its market share by new or existing competitors," Renaissance said. There has been some rise in the volume and price of BK shares following this announcement.