Our theme for this year is Responsible Banking in a New Era. This is something that is gaining currency of all over the world. Even in Kenya last year, the Central Bank came up with a Banking Charter, focused on responsible banking, that all banks are expected to adhere to.

You are a global bank and this concept is certainly not new to you. What is Citibank doing locally and globally in encouraging responsible banking?  

That's a very timely question given the extremely difficult circumstances we are operating in with the onset of the Covid-19 pandemic. 


I will answer the question in two ways. One, at a local level on how we as a corporate citizen and as a corporate bank are aligning to the requirements of the Banking Charter, which has elements that ensure compliance to what the central bank's vision of responsible banking is. This really comes down to four elements, one is customer centricity, in terms of how we run our business to ensure that we put our customer at the center of how we operate.


Two, is the concept of risk-based pricing, it's not really just about giving products to customers that solve their needs, but also how we price those products from an interest rate and tariff rate perspective.


Three is the concept of transparency. This is to ensure that customers also understand our products and that we are transparent enough in how we operate.


Four is the concept of ethical banking, meaning banking that has a purpose and is not just focused on profits but purpose in terms of growing our communities. Things like financial inclusion and empowerment of communities and so on.


Those are the four elements of the Banking Charter that the central bank has introduced to the banking sector for all supervised banks.


Citi Kenya have been here for 46 years and we are fully compliant with those four elements of the banking charter. We actually report as required on a quarterly basis to the central bank, in terms of how we comply.


Moving away from the banking charter locally, our own business globally, is actually focused as well on principles of ethical banking. How we meet customers' needs, how we treat them, how we maintain their information and how support their needs. 


To summarize the answer, locally we are meeting all the elements of the banking charter as promulgated by the Central Bank of Kenya. Globally the theme of ethical banking, - purposeful banking is something that we live with throughout the countries that we operate in. 


You've mentioned that the theme is very appropriate at the moment because we are living in difficult times with the Covid-19 pandemic. This has called on the banking sector to really be more indulgent in terms of how you deal with your customers. What from your perspective as Citibank, have you been doing in the wake of Covid-19, in terms of how you handling or relating with your customers who may be experiencing some financial difficulties?


As you have seen well publicized in the local dailies,  as banks report their second quarter results, some of the challenges that the banking sector is experiencing given the pandemic are clear.  To be specific, the support to customers is probably most prevalent around the forbearance or shall I say restructuring of loans. Loans in the various sectors, whether it's personal or corporate or consumer loans. Obviously as incomes become strained and job losses accumulate and companies lay off workers, a lot of our customers whether they are consumers or corporates are struggling. What we as a banking sector, in general and we as Citibank specifically, are doing is to restructure loans of our customers by giving them either moratoriums on principal or and interest from periods of three months to a year. In some cases it is even longer than a year. You know we have a very select group of corporate customers given our business model, so specifically at Citi some customers with difficulties have come to us saying, our industry has has really taken a very significant impact from Covid-19, can you
help us restructure and give us forbearance on facilities. We've done that in the transportation sector for our customers. We've given them forbearance for a year. In totality the banking industry has restructured about Ksh. 844 billion of loans. That's the most recent number reported by the Central Bank. At Citi, that number is about Ksh. 30 billion of loans. That's what we have restructured.


Again, the uniqueness of our model is that the number of loans we've restructured is relatively lower than the consumer type businesses or the retail consumers that other banks have, where that number may be higher. So corporates might be in a position to weather the storm a lot better and with more resilience than retail or consumer customers who obviously have a different capacity to weather the storm.


So to your question, we are responding to our customers who are asking for moratoriums or restructuring of facilities and working with them to ensure that we support them through the pandemic because if our customers survive the pandemic, they should then reasonably be able to continue banking with us, as and when the recovery takes root. 


So that's one way, the other ways is really looking at areas where we can improve the efficiencies, particularly moving them into digital platforms in terms of how they bank with us, how they interact with us, the payments we process for them and the transactions we process for them. So we have seen a significant shift in channels, meaning our customers are having direct access to customer platforms, going on to e-commerce platforms and using payment platforms that are more electronic. We are supporting them in that change -that shift to a more digital operating model. 


Thirdly we are working with our partners on the non corporate side. All that we do is not just corporate. We also have significant CSR activities that we do on the Citi Foundation side, where we partner with NGOs to also support vulnerable communities. This is at two levels. One is on our pure community day-type activities where we give back to communities that we do business. Two is working with micro retailers. Micro retailers, are small dukas that have gone through a very significant dislocation during this pandemic. Working with some of our partners, like Techno Serve, which is an NGO that we partner with, we've been able to also support some of these micro retailers who form a good bulk of the MSMEs that operate in the country. 


So those three examples are some of the ways we are supporting our internal stakeholders and customers during this pandemic.




You have been one of the most resilient banks in this country. In terms of growth in assets, over the last 10 years your assets have grown by more than 50%. In our own rankings, where we look at asset quality, capital adequacy, earnings and liquidity, you have ranked number one in the entire banking sector for more than five years or more. Clearly Citibank is really stable and doing quite well. Take me through your performance in 2019 compared to 2020.


I will start by saying 2019 versus 2020 are worlds apart.  If I give you just some statistics, in June 2019, we had a balance sheet of about Ksh. 90 billion and we closed the year in December at Ksh. 96 billion.  In June 2020, our balance sheet was at Ksh. 103 billion. So if you look at year on year growth from June 2019 to June 2020, our assets have grown by 15%.  Our corporate loan book has grown by 35% and our comprehensive income for the year as of June 2020 relative to June 2019, has grown by 11%.


You've seen the published results, many banks have had very significant adjustments downwards in terms of their comprehensive income for the June 2020 half year. Our performance is not because we walk on water. 


Let me unpack why that is the case. One, we have a very unique business model in terms of the customers that we support. Our customers have been fairly resilient during this year on year period. As our customers have grown, so we have grown with them. 


Secondly, our performance in terms of our non-performing loans. The industry average is 13%. We are significantly far from that industry number, we're in the low single digits in terms of our NPLs. Why that is so again comes back to the nature of our customers, the nature of the segments that we operate in and the quality of business that we write for customers. This is not to say that we do not take risks. The essence of banking is to take risks and to manage that risk responsibly.


So we've had a fairly strong growth in the last year on year. But if I look back to the ten-year period that you've talked about, yes, we've grown substantially in terms of our key metrics. Our capital position remains strong whether it's core capital or total capital to risk-weighted assets, we have a very liquid balance sheet, our liquidity ratio is currently sitting at 70% versus a regulatory minimum of 20%, which is a very significant cushion of 50%. Also our capital to deposit ratio, which is another measure that we look at for capital strength and balance sheet strength is about 25% versus a regulatory minimum of 8%. So yes, against all measures, I think we are doing well. 


But you don't measure yourself based on your ratios only. I like to believe that you measure your performance based on how your customers are doing. You cannot grow in spite of your customers. For you to grow, your customers have to grow so we have been able to achieve this growth because our customers have actually grown and we've grown with them. That's how we look at our business. 


Let's talk a little about the Covid-19 pandemic and its impact on the banking sector. As you mentioned, it's clear that quite a number of banks are struggling. First half results show clearly that some of the very big banks that have been making quite some good profits are actually suffering already. As a corporate bank I think you've got a very good feel of the pulse of the economy, at least from your customers. How serious is the impact of this pandemic on the economy? Is this a catastrophe that is going to cause chaos in this economy in the next one year or so?


What you have to think about is, how this health pandemic translates into an economic crisis. In Kenya, we are in a stage where we're starting to see a reduction in the number of infections and obviously fatalities have been low relative to the global average. Kenya has has performed relatively well in terms of the health crisis, right. What we now are focused on is how this will impact the economy. The economy at the beginning of the year was forecast to grow at 6% for 2020 versus a 6.3% in 2019, full year growth. At the moment, the economy is forecast to slow down and grow at 2% to 2.3% based on the statistics given by the national treasury and the Kenya National Bureau of Statistics. However, there is also a more pessimistic picture from other International partners who foresee a recession of between negative 2.5% to negative 3% growth in GDP, meaning a contraction. I think my view and this is a personal view based on our observation also a Citi. We think that Kenya's recovery will actually be much quicker. It may not be a v-shaped recovery, but we believe that in the fourth quarter,  we should see the economy start to recover. 


So we're not saying that growth will be anywhere close to the 5% to 6% that we've been used to but we've started to see growth rebounding. As the economy opens up, as international flights start again, as domestic and international tourists start going into the hospitality segments, as the movement within counties becomes unrestricted and goods and capital can flow, we should start to see incomes recover.


The most important element to look at is how quickly incomes will recover,  because income recovery means consumers can start spending more. Consumer spending then has a trickle-down effect into the rest of the economy. I think what we're seeing, is that agriculture is holding the country in good stead. Agriculture forms one-third of our GDP and it should do well in the next two quarters. I think what my take time is recovery on the manufacturing side. As you know, value chains had been disrupted when there were closures of international borders, we should hopefully see on hospitality front and tourism front,  the numbers start to pick up as forward bookings start to increase, as visitors start making plans to again patronize these areas and more importantly the local services sector should also start to recover. 


So to summarize my answer,  I am pretty optimistic in terms of my forward looking picture. I think the economy will start to recover in the fourth quarter, whether it's U-shaped or V-shaped, the recovery will start in earnest. I do not think the country will contract in terms of full year GDP growth. I think the estimates by the National Treasury, Kenya National Bureau of Statistics at 2% are fairly reasonable given the information we have now, however, what could change things is if the trajectory of the pandemic becomes worse and we have a second phase or third phase. That then complicates the economic picture.


Looking at how bad the situation is, don't we need some kind of a stimulus plan? Do you really think that we are just going to just start growing without something to jumpstart the economy? 


You raise a good point. A stimulus package is obviously important and it's not that the government has not
provided stimulus in the economy, they have done that through tax breaks as you've seen and through cash stipends to vulnerable communities that has been running from May to October. These cash stipends have been paid through mobile money platforms. The forms of stimulus that have been provided have been heavily tilted towards tax breaks such as the reductions in Pay As You Earn (PAYE) and VAT, breaks and refunds of VAT and so on and so forth. 


However, there is a question on how these stimulus packages will be funded and it's an important question because Kenya is currently running a fiscal deficit for the 20/21 financial year. To have a large stimulus package provided to boost the economy as you've seen in most Western countries, it has to be funded, it has to be paid for and that has to be done either through tax collections and/or borrowing externally or domestically. So there's a question of how to fund those stimulus packages.

I think the the broader question is, how do you stimulate spending. How do you stimulate consumers, who are really the backbone of the economy, to drive consumer spending that can then drive an economic recovery based on consumer spending.

The recovery will not be based on infrastructure spending. Infrastructure spending is a separate type of growth that does not create jobs to the extent that you would actually want to. Consumers have to recover, incomes have to recover and the ability of consumers to weather the storm has to build. That's the resilience that needs to come back. 


So my answer to you is, yes stimulus packages are one element of the recovery, but that's not the full picture. You also need to see spending on the consumer side recover. 


I think we all agree that Covid-19 is not going away tomorrow. It will probably be with us into the first quarter or even third quarter of next year. It all depends on what happens with the vaccine or if some medicine that can actually treat it is found. From your perspective how do you think next year is going to pan out? 




We can hope for the best but plan for the worst. As a business, we are assuming that Covid-19 will be with us, for at a minimum, for the next 12 months. May be longer, like 18 months depending on when a vaccine is found and when that vaccine becomes available to the broader population. That is all 7 billion people in the world theoretically need to have access to that vaccine. So there is a very big logistical question around how you distribute that vaccine to the most vulnerable. To the poorest countries and to the broader population as opposed to the the richer countries that may have the resources to have access to that vaccine. So the vaccine is one issue.


How to distribute it and to have that vaccine widely available is another question. So we are planning and our view is that we should plan to live alongside Covid-19 for the next 12 to 18 months. That means that until the end of 2021, we should plan to live alongside Covid-19. That means adjusting your business, adjusting your lifestyle and your social fabric to Covid-19 being around in some shape and form. My sense is that we will as a country adjust to Covid-19 based on the precautions that have been communicated so frequently by the government and by the World Health Organization and live alongside this virus until the end of 2021. We hope that the economic activity, recovery and the opening up is also taking into account that Covid-19 is not going to disappear overnight. Will that inhibit growth? Will it inhibit getting back to business? How do kids go back to school? How do we resume some semblance of normalcy? 


The short answer to your question is that we have to live alongside Covid-19 and we have to plan our lives alongside Covid-19 as well as our economic and commercial activities. So I think 2021, to summarize the point,  is going to be a year that we will have some sense of normalcy, the New Normal, alongside the virus, but with recovery that is based on pragmatic approaches to reopening the economy, unless we get a vaccine sooner. Not just discovery, but we also have to deal with the logistical challenge of distributing it globally. We have to assume that we have another 6 to 12 months, at a minimum ahead of us.


Let's look at that broader macroeconomic environment, not just locally but globally. How things turn out depends a lot on what happens in the global markets. What is your take on growth in Kenya and globally in 2021? 


I think the global picture remains challenging. The best case scenario global GDP growth estimate is -5%, a
contraction. The picture varies with different economies, whether you look at the UK or the US, or China and India. There are some economies that are projected to contract much more and others might bounce back a bit quicker. 


I think the global challenge, as I said before is how to slow down the transmission of what started off as a health crisis and morphed into a global economic crisis. The sooner a vaccine is found, the sooner global production in terms of value chains kick off, the sooner consumer spending starts to become more resilient, especially in the larger economies, the sooner manufacturing output increases, only then can you start talking about the global economic picture improving. I believe that 2020 is going to be a challenging period in terms of global growth. The baseline estimate is -5% contraction.


As for Kenya, I think we might be we might actually come out much better at between 1% to 2% growth in 2020. I believe that 2021 for Kenya will have a lot of pent up economic activity; expansion for companies that have delayed expanding or CAPEX spend and for consumers that might have started getting back their incomes. I think the 2021 picture will probably have a construct of pent-up demand coming back into the economic cycle and that to me will help the recovery and performance in 2021. So the estimate for Kenya in terms of growth 2021 is about 5% in 2021. Again that is subject to a number of factors in terms of recovery, such as the slowdown of the pandemic and how we flatten the curve in 2020. I think the National Treasury and the Bureau of Statistics, estimated anywhere from 5% to 6% growth for Kenya. My sense and the Citi's sense is also about 5% growth for 2021. 


I think the global picture is a much more complicated response and I would rather focus on our immediate environment in terms of estimates.


There has been a lot of focus on the negative impact of Covid-19. I'm sure there have been some positive aspects. I see a lot of people talking about changing strategies, saving costs on office space and all sorts of things. Have there been any positives, from your point of view, as a result of Covid-19? 


I think that's the question that we don't ask enough. We talk about all the negatives and the challenges we've had in the last six months since March, but if you think about it, there are opportunities that have emerged in various ways. I want to just focus on this element of the digital economy, what is called the fourth industrial revolution.


A lot of companies have found ways of doing business differently. A number of us have not gotten in to a plane in the last six months and we have still been able to serve our customers, to engage with them and to work with our employees. Citibank has 200,000 employees globally,  when Covid-19 struck, 80%, (160,000 employees) were working remotely, meaning working from home at one point in time. Never in the history of the organization have we achieved such a such a feat? So Covid-19 has actually shown how resilient and resourceful we can be not only as corporates but as individuals.


Just this conversation we're having with you here, in pre Covid-19 times, I would either be at your studios or you'd be here in my office and you would be having a face-to-face. But now the interactions are very different. We have actually in earnest started the real digital revolution, the fourth industrial revolution and it goes to everything even education, how we talk to our customers, how we serve our customers and how we relate with each other.


I think the silver lining in this pandemic is that we have had to be resilient and resourceful in how we have responded to this crisis. Today any business that does not have a digital strategy, that does not have a way of navigating the next 12 months digitally, in terms of communicating with its customers, serving customers and allowing employees to work remotely with flexibility, is really going to struggle. So, it has really accelerated what would have been a two to three year process in some ways and brought it here now for companies and for individuals to adjust. It is this crisis that has brought about this this opportunity.


Going forward we will continue to evolve. To improve our strategy as we navigate this pandemic. You might not see, businesses going back to the level of business travel that was there before.  The amount of real estate that was taken up in terms of office space might reduce. Of course, there is a negative impact to certain industries, but there are opportunities also. It depends on how you look at it. We tend to look at it as a glass that is half full and not half empty. How you navigate the next 12 to 18 months is really based on the decisions you  
take around how to position your business for the new economy.


Certainly, the next couple of months are going to be very critical in terms of chatting course going forward, not just for the banking sector, but for the entire economy. Let's hope for the best.  Thank you for creating time to have this discussion with me on Zoom.


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