While most commercial banks in the country have been affected by the liquidity crunch, prompting the National bank to pump liquidity into the sector, Bank of Kigali did was not affected as it continued to issue loans to its clients without necessarily increasing interest rates. Lawson Naibo, the chief operations officer of BK. (file photo) According to Henry Gaperi, the chairman of the board of directors of BK and also director general of the Social Security Fund (CSR), the bank has a strong market position. “Of the Frw 3.6 billion collective profits, BK made Frw 2.9 billion,’ Gaperi said. On top of that, the bank has a leading position in terms of total assets, customer deposits, loans and shareholders’ funds and an overall market share of 25% of the banking sector. However, despite being less affected by the liquidity crunch, BK took steps to mitigate its impact. According to Lawson Naibo, the chief operations officer of BK, the strategies include continued lending in order to maintain the pace of the socio-economic development, not increasing lending rates, maintaining competitive deposit rates, expansion of its services as well as negotiating lines of credit with regional and international lenders. “You do not want to give your customers a hard time during bad times but to ensure that there is cooperation between the bank and its clients despite the hard times,” said Louis Rugerinyange, the Managing director of BK. As regards the performance of the bank, net interest income of Frw 5.333 billion representing a 10% increase compared to the same period in 2008. “The increase is basically due to the bank’s strategy to change the structure of the earning assets from government securities to customer loans,” Naibo said.
Branch expansion
Despite the increase in interest income, the bank’s expenses also increased by 23% compared to last year. The higher operating costs were attributed to branch expansion strategy as well as employee salary and other overheads. The overall cost to income ratio was 53% compared to 46% in 2008. Profit tax of Frw 2,975 million was lower than the same period in 2008 by 11% as a result of high cost resulting from branch expansion. The bank also increased its staff by 55 employees and expects to recruit more staff in order to improve service delivery. According to Rugerinyange though the bank did not take up liquidity injection from the National Bank, BK might require liquidity injection in order to keep supporting key development programs of the country. “It is possible that we might approach the National Bank so that we can keep lending to strategic development agendas which are of interest to the country,” Rugerinyange said. In the future the bank will be looking for ways to float shares on the stock market. “It’s the current thinking of the government to float shares on the over the counter trade so that every Rwandan can own shares,” Rugerinyange said. The public often regards BK as a bank for people with large incomes and not suitable for small entities such as SMEs and people with lower incomes. However, Naibo was quick to assert that the bank is for every Rwandan. “That notion is no correct, and part of the reason we are expanding to the rural areas is to target small and middle income groups,” he said. Related articles: Bank of Kigali going strong, despite global financial crisis |
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