Bank of Africa Kenya Limited is now Focusing on Return on Equity rather than increasing the market share.
Bank of Africa is a subsidiary of Morocco's BMCE Bank. BCME holds 75 per cent of the group. BMCE is the second largest bank in Morocco with a total asset of $ 20 billion and over 650 branches in Morocco. It also has about 14 per cent market share in Morocco both in banking and also involved in Bancassurance. BMCE is owned by Finansco Group and CIC a French bank. BMCE owns Bank of Africa Group (BOA). BOA Group has a shareholding of 80 per cent in BOA Kenya Limited. BOA Group has subsidiaries in 17 countries in Africa including; Benin, Madagascar, Côte d’Ivoire, DRC and Djibouti.
BOA Kenya has been in Kenya since 2004. It has presence in all East African country and a representative office in Ethiopia. “This means we are ready to enter the Ethiopian market as soon as it opens up to foreign banks. We have 30 branches in Kenya, 32 In Uganda we have and 25 in Tanzania. We are quite spread in these markets.” Notes Ronald Marambii Managing Director Bank of Africa Kenya Ltd
“2017 was a very challenging year for the whole industry because, we had just implemented the interest rate cap which was signed into law in September 2016, at the same time, private sector credit growth was very low at 4 percent and had signs of growing lower. 2017 was an election year, usually, election years slow down the economy. The presidential election of US had just finalized with Trump coming in. There were many uncertainties coming from that and also IFRS 9 the new accounting reporting standards mean to be implemented in January 2018.” He elaborates.
Mr. Marambii reveals that they resorted to shrink their balance sheet and reduce expensive deposits because there was nothing much they could do with them. “Our balance sheet shrunk but there was more efficiency. We saved a lot on interest expense, and we were also able to reduce our risky assets.” He says. They went ahead to close bank branches that were not contributing positively to the bank. But still were able to serve our clients through technology. They managed staff by having voluntary early retirement package offered where 45 staff volunteered for early retirement. Their staff numbers currently range between 421 and 425.
Mr. Marambii is among the few banking heads who perceive the positive side of interest rate cap. He notes “Capping has helped banks be more cautious in their lending. Now we cannot price for risk with margins as big as before. You will see a lot of discipline. Banks are not ready to do unsecured loans. This is an effect of the interest rate cap and IFRS 9.”
In His view, the law may not be repealed fully but it may be tweaked. There will be a wider framework in which to manage consumer credit. The capping was dealing with consumer credit because the person with little bargaining power is the consumer market not the corporate market. Corporate were getting prime rates even before the capping. “What we are expecting as banker is more comprehensive regulation not lifting of the cap. Not that the old was not good because bank had moved in areas that were not there because they could price for risk. Bank had commoditized credit, by so doing; they had put everybody at the same level. They were not differentiating uniqueness of customers. They were giving loans at the same rate.” He explains
Being a Pan-African Bank, BOA prides itself for strong connections that other commercial banks do not have. The bank plans to ride on its connectivity. “BOA is quite strong on the foreign exchange side, from the financial statement. We have one of the most vibrant and competent treasury departments because we are a Pan African Bank; we are able to manage currencies much easier through synergies with our subsidiaries. This has resulted to revenue growth. This has been increasing because we have been doing integration through technology with public institutions. They have integrated their systems with customs, KRA, NHIF, Nairobi City Council, customers can transact with this institutions through BOA. The next big thing is integrate with schools on school fees payment. There has been that drive of fees and commission.” He explains.
In the technology space there are working on a project that started last year of centralized data centers. “BOA will have two data centers, one in Casablanca and the other in Kenya. This will be linking seven countries where our subsidiaries are located.” He reveals. The whole idea is to make the business across the continent seamless, such that if you are a client of one subsidiary, you can make transaction with any subsidiary without inconvenience. This will be immediate transfer. They expect to complete this project by end of this year.
They also plan to have a treasury platform where again they will be able to do international business seamlessly. “Right now we are doing parallel run in Kenya. Uganda’s happened three months earlier. This is being rolled moved in all the subsidiaries of BOA. Whatever technology, it must have a wider scope because it is looked at a continental basis not a country basis.” He notes.
“Currently we do not have any agents; it is an area we are looking at to see whether we will focus on it. Our bank focuses on medium, large businesses and international trade finance in the region but the mobile banking is quite rich. The only thing missing is mobile lending, the other features are on the mobile banking platform.” He reveals.
BOA is among the few banks which are quite prepared for IFRS compliance. “This is partly because we are part of a bigger group of banks. We believe we are resilient enough to handle any shocks that could come from IFRS9. We will follow the regulations of CBK in how they want it spread out especially on capital plan because currently there is a draft paper that is yet to be finalized. We are in eight European countries; these laws are applicable in those countries also.” He affirms
Moving forward, BOA is not concentrating in growth, they have a market share of less than 2 per cent. They are looking on return on Equity. At a group perspective, the group is aiming at ROE of 10 to 15 per cent. “We are currently on 13 per cent ROE. We are pushing ourselves to reach 12 per cent on banking activities and later on move it to 20 per cent by end of 5 years period. We are concentrating on particular niches of business and making sure we meet the changing needs of our client.” He reveals. 55 per cent of our business is corporate; the rest is shared between retail and SME. From 2016 BOA changed its strategy on the retail side. It is mostly on the retail sector for the clients that we are banking Corporate and the SMEs. “We are not on retail on the mass side as you see with other banks.” He states.
Mr. Marambii is one who aspires to make a difference in everybody that is associated with him from the staff, to the client and to the society at large. “You must have a purpose. You must be able to unlock the potential of those around you and enable them to meet their aspirations. If I am able to bring up a staff such that they are able to meet their career aspirations, their personal goals, then I would be a very satisfied MD. The same with my clients because if you are a business man you have your own ambitions, you want to move from one stage to the other.” He notes
“Banking is about trust; the Banking Industry has gone through confident crises, when Imperial and Chase bank went down. With the enactment of capping law, banks are seen as exploiting the market. When information is out there, it moves very fast especially on social media and at times the information is not verified.” He points out. Mr. Marambii offers a piece of advice stating that we need to see a higher degree of responsibility since banking is all about confidence. Unverified information continues to creating suspicion of the banking sector. It is important to see banks as enablers, business partners and instruments for financial development in the country, not as instruments of exploitation. He states that there is need to change the mindset of the market to see the essence of banking
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We are ready to enter the Ethiopian market as soon as it opens up to foreign banks - Ronald Marambii, CEO BOA