KCB Group posted a 102 percent jump in net profit for the first six months of trading, putting the lender on a firm recovery path from Covid-19 disruptions.
Group CEO Joshua Oigara spoke to the Business Daily on the lessons picked in the pandemic environment, the opportunities, the pressure of retaining top one spot, what it means to have a Sh1 trillion balance sheet and the prospects of increasing dividends.
YOU DESCRIBED LAST YEAR AS A PERIOD OF SURVIVAL. WITH THE PERFORMANCE KCB HAS POSTED IN THE FIRST HALF OF 2021, HAVE SUNNY DAYS SET IN?
Yes. Today the economic outlook is very positive. We have very good recovery in many areas. We see our customers building their businesses. The difficulties of Covid-19 are largely behind us.
IN THIS RECOVERY, WHICH OPPORTUNITIES DO YOU SEE IN THE ECONOMY?
We see a lot of recovery across sectors. Some areas which we will now have to focus more on include agriculture, energy, telecommunications, construction, trade and manufacturing.
Our customers were affected much last year but have come back strongly this year. We see customers rebuilding their enterprises, construction picking up and manufacturing, and agriculture rising. I see bold optimism.
AS A LEADER OF A TOP FINANCIAL ORGANISATION, WHAT HAS THIS PANDEMIC BROUGHT OUT IN YOU THAT YOU PROBABLY HADN’T DISCOVERED ABOUT YOURSELF?
Change is the only item that is constant in our environment. The pandemic has taught us that we are more resilient and able to find new pockets of strength to redefine our ambitions and remain steady.
It has made me, more than before, confirm that we must be prepared for anything that life throws at us but we need to have the humility and the conviction to stand and fight every day.
That fight is what actually drives our business. That fight is the life we breathe in our enterprises. That fight is what elevates our responsibility to support our staff and customers.
GOING BY 2020 FULL-YEAR RESULTS AND HALF-YEAR 2021, YOUR CLOSEST COMPETITOR [EQUITY GROUP] HAS PUT UP A SPIRITED FIGHT IN BECOMING NUMBER ONE. WHAT ARE YOU GOING TO DEFEND YOUR NUMBER ONE POSITION?
We have always been number one and we do have plans and intends to remain number one. We are number one in Kenya and we will be number one in the region.
We will continue to grow our businesses in all the areas both on our large customer category and SMEs. We will grow our consumer lending space in Kenya and across subsidiaries.
We will also bring in more growth in our digital financial services through mobile loans, close the two transactions in Rwanda and Tanzania and we also look forward to completing a transaction in DRC Congo in the coming year.
Yes, it is more competitive today but I have no doubt that it is a chance to refocus our business. It is always easy to be number one but to remain number one is always the difficult position.
We know how to become number and to remain number one. We intend to keep our number one position by the time we come to the end of the year.
KCB IS YET TO SWITCH TO RISK-BASED PRICING MODEL YET INTEREST RATE CAPS WERE DROPPED IN NOVEMBER 2019. HOW ARE YOU PRICING NEW LOANS AS YOU AWAIT REGULATOR’S CLEARANCE?
We have not seen many new customers seeking loans. In a crisis, our ambition has been to support existing clients. Our maximum price is at 13 percent.
Our loan book in the first half of the year has increased by close to Sh60 billion and that is largely driven by customers who had existing businesses and they are recovering.
IT IS NEARLY TWO YEARS SINCE RATE CAPS WERE REMOVED. HOW COMPLICATED IS THE PROCESS OF BUILDING A RISK-BASED PRICING MODEL?
Developing a loan pricing model is like building a new express highway. There is a lot of work to be done to build the platform, fabricate the pillars and put the concrete slab.
It is the journey we are taking and it has no switch-back button. Once you switch on to the new model, it is gone. I am okay with the journey.
We are at the tail end of discussions with the Central Bank of Kenya and I am quite optimistic that we will get final agreement to roll it out as we go into the next financial year.
KCB’S BALANCE SHEET HAS CROSSED THE SH1 TRILLION MARK. WHAT DOES THIS MILESTONE MEAN FOR THE GROUP AND THE CUSTOMERS?
The milestone is an acknowledgement of huge commitment and support from our customers. This also demonstrates that customers see us an enabling partner with a strong heritage.
This gives us scope to expand our lending portfolio both from small and medium sized enterprises, our large customers and to individuals. The beneficiaries will be our customers in the region.
With a capital of Sh152 billion, our single obligator limit has now risen above Sh25 billion.
YOU HAVE MADE NEW APPOINTMENTS IN YOUR CREDIT SECTION. WHAT DOES THIS SIGNAL?
The reason why we are refreshing and strengthening our team is to accelerate our lending to SMEs. That is an area we see a strong growth and yet it is an area we haven’t done really well.
Our SME portfolio today is less than 10 percent and our ambition is to more than double our own lending to the SMEs between now and next year.
YOUR FIRST HALF PROFIT EQUALS 79 PERCENT OF WHAT YOU POSTED IN FULL YEAR 2020. WHERE DOES THIS LEAVE YOU IN TERMS OF ABILITY TO GO BACK TO PRE-PANDEMIC DIVIDENDS?
It is still early to tell. But with our performance, I believe as we go into full year, there will definitely be a review of the dividends. Last year we cut dividends. I can’t say the level we will go to but we will definitely review as we go into full year.
We will discuss with CBK as the current guidelines state. Dividends today are subject to engagements with CBK.
I am very optimistic today on the second half. With this performance, if we sustain into second half, it means there is actually a good position to go back on our dividends next year.
DRC MARKET HAS BEEN ON YOUR RADAR FOR LONG. ANYTHING TANGIBLE SO FAR?
Opportunities don’t always come in these markets. People don’t advertise themselves for sale. It doesn’t work like that. You don’t go to a market and pick a bank on the highway or street.
We have good conversations going on at the moment with two different players in Congo and at the right time we will communicate. I am very optimistic for the year 2022.
FOREIGN BANKS ARE STILL FLOCKING TO KENYA FOR OPPORTUNITIES. IS THERE ROOM FOR KCB TO ACQUIRE ONE MORE BANK AND STRENGTHEN ITS POSITION LOCALLY?
No. We believe our leadership position in Kenya is a very strong one. We do know how to become leaders and remain leaders in our markets. I will be very straightforward that we have no intention at all in our local market.
Our ambition is to grow in our regional market and that is where our greatest focus will be.