The KCB Group chief executive Joshua Oigara spoke with James Anyanzwa on the bank's post-Covid-19 plans.
KCB just released financial results for quarter 1 (Q1), 2020, showing an eight per cent growth in profit after tax. Are you happy with this performance?
Under the prevailing circumstances it is a good performance. Our business is growing within all lines, our assets are up, loans are up, our non-funded income has increased and overall revenue is up. We have seen some increase in our level of provisions, and our costs are well managed. We have also seen a lot of customers migrating their transactions into our mobile and digital platforms. So this is a good performance. We are aware that we are facing an unprecedented global crisis but it came late in the quarter so the challenge will be in the second quarter and perhaps the rest of 2020.
Paint for us a picture of how your international subsidiaries performed in Q1 in the wake of Covid-19.
The greatest issue on our business is that we have integrated National Bank which is a new acquisition in Kenya, so it played a big part on our performance in the quarter. NBK performed well and that is an important aspect to note. But generally all our businesses internationally have grown compared with the same period last year. From Uganda, Tanzania, Rwanda, Burundi, South Sudan we are seeing strong performance compared with the same situation last year.
Uganda faced some difficulties but recovered. We are on track in terms of posting double-digit growth and forecast a more than 20 per cent growth year-on-year. Our subsidiaries have remained resilient and in Q1 we have seen a very important contribution from them.
How much of your loan portfolio have you restructured to cushion households and businesses during this period and which loans have been largely affected?
So far, we have restructured Ksh110 billion ($1.1 billion) which has been growing over time. So if you think about our loan book value, which is Ksh554 billion ($5.54 billion), and we have done only Ksh110 billion ($1.1 billion), we are still below 20 per cent.
We believe in our own forecast that about 25 per cent of the loan book will be affected in this crisis because by the end of last week we had reached 20 per cent. Most customers have already communicated and written their own proposals and we have already reviewed 90 per cent of those requests.
That is why I'm confident we are more or less up to 25 per cent of our total portfolio. But so far Ksh110 billion ($1.1 billion) is what you can take across all segments. We have not seen much restructuring on our check-off loans or consumer loans so far.
What kind of loan restructuring is KCB pursuing?
This was all driven by the guidelines issued by the central banks in the region. One is increasing the limits, credit lines of customers and expanding their loan tenures. We have also given them a moratorium for both principal and interest. It is varied but largely, they are given more time to repay.
Is your pan-African expansion still on course?
You have to be cautious which market you get into. So the challenge in the interim is to address the concerns of the pandemic. I would not say that we will remain robust on our growth in those markets but if an opportunity arises we will look at it. Remember our growth into these markets is not a short term, but more long term, meaning three years or five years and remain on course.
Update us on the NBK acquisition and how much new capital KCB has injected into this subsidiary to date.
We put in Ksh5 billion ($50 million) last year. This year, NBK was to raise additional capital from the recoveries. We don't anticipate to put any additional capital in NBK this year. They are looking to be on track, they have been fully consolidated so the capital gap which they have is around Ksh2 billion ($20 million). Remember NBK has adequate capital but the issue is we have loans that have not been recovered for long and if we do, we will have sufficient capital to run our business. We are in a good state and remember we bought the bank at Ksh6.5 billion ($65 million) through a share swap.
What do you think will be the new face of banking post Covid-19?
I wouldn't say that there will be a new face. Banks, especially here in Kenya, have been quite driven towards moving transactions and serving customers on various mobile platforms particularly on lending, savings account transactions and also on payments. Majority of our transactions are outside the branch. Already 95 per cent of them were outside the branches by last year and now it is 97 per cent. That is where we would like to see a lot of activity so that customers can get their services from the comfort of their mobile devices.
There will be no new disruptions because banks are already there. We may see acceleration and transformation, more investments in that area. The crisis will perhaps accelerate investments in digital channels. And if you do that on the regional digital platform, there you will see the bank of the future.
We have given our customers more time to pay off their loans by extending the maturity or providing additional working capital for them during this crisis.
Those are the models we have addressed in the interim period.
They are actually aligned 100 per cent with what the Central Bank of Kenya, the Bank of Uganda, the Bank of Tanzania, and the National Bank of Rwanda announced. And for those four regulators the restructuring is very much prescribed.