There are 12 licensed banks in Rwanda.
According to the Central Bank of Rwanda, in the first quarter of 2011, consolidated net profit for the banks for the period rose to Kshs. 687 Million from a net loss of Kshs. 42.4 Million in the same period last year.
Bank of Kigali made Kshs. 286.4 Million in the first quarter of 2011, representing 41.7%. In 2010, Bank of Kigali was the most profitable bank in Rwanda, accounting for more than half of total banking sector profits
The central bank said the performance is a result of a strong asset growth and competition in the mobilisation of deposits after banks strengthening their activities.
The Rwandan financial markets are heavily skewed in favour of the 3 largest banks which account for almost two-thirds of total loans advanced, plus 59% of deposits.
Market share in the Rwandan Banking Sector between Bank of Kigali and Bank Populaire du Rwanda (number 2 bank in Rwanda) as at 31st December 2010
BANK OF KIGALI Kshs. | BANK OF KIGALI MARKET SHARE | BANK POPULAIRE du RWANDA Kshs. | BANK POPULAIRE du RWANDA MARKET SHARE | |
TOTAL ASSETS | 29.6 BILLION | 27.4% | 16.4 BILLION | 19.1% |
CUSTOMER DEPOSITS | 20.3 BILLION | 25.9% | 12.9 BILLION | 19.8% |
NET LOANS | 15.2 BILLION | 31.5% | 10.3 BILLION | 24.3% |
SHAREHOLDERS EQUITY | 4.8 BILLION | 32.2% | 2.4 BILLION | 19.5% |
Management cites the following competitive advantages it possesses in the banking industry:
-leading market position
-diversified and evolving product offering
-a trusted and recognized brand
-wide and expanding distribution network
-experienced management and board
-access to long-term wholesale funding
Bank of Kigali will be betting on its expansion strategy to maximize shareholder value. The bank intends to increase its footprint to 60 branches in the next 2 years from the current 33 branches. It also aims to increase its Point of Sale terminals to 500 by the end of 2011. As at 31 March 2011, this stood at 100 POS terminals. This shows the banks intent not to rest on its laurels, but further keep enhancing value of its business
By further improving its internet and mobile banking channels, Bank of Kigali aims to serve over 500,000 clients over the next 5 years
Bank of Kigali Retail Lending Breakdown as at 31st December 2011
AMOUNT IN KSHS. | % OF RETAIL LOANS | |
MORTGAGES | 1.51 BILLION | 48.6% |
CONSUMER LOANS | 1.23 BILLION | 39.6% |
OVERDRAFTS | 301 MILLION | 9.7% |
OTHERS | 66.1 MILLION | 2.1% |
TOTAL | 3.11BILLION | 100% |
Bank of Kigali Corporate Lending Breakdown as at 31st December 2011
AMOUNT IN KSHS. | % OF CORPORATE LOANS | |
Corporates | 9.25 BILLION | 72.9% |
Small and Medium Enterprises | 3.08 BILLION | 24.3% |
Non-Business Associations | 351 MILLION | 2.8% |
TOTAL | 12.681 BILLION | 100% |
Bank of Kigali Total Loan Portfolio Breakdown by Industry as at 31st December 2011
INDUSTRY | AMOUNT IN KSHS. | % OF TOTAL LOANS |
COMMERCE % RESTAURANTS | 7.2 BILLION | 45.7% |
CONSTRUCTION | 4.61 BILLION | 29.2% |
MANUFACTURING | 1.72 BILLION | 11% |
OTHERS | 1.124 BILLION | 7.1% |
TRANSPORT & COMMUNICATION | 1.102 BILLION | 7% |
TOTAL LOANS AND ADVANCES | 15.8 BILLION | 100% |
At the end of the 2010 financial year, the bank had Kshs. 215 Million in Treasury Bills and Kshs. 332.8 Million in Treasury bonds. These figures were however scaled up by 31st March 2011, as the Total investment in Government Securities at that point stood at Kshs. 1.83 Billion, an increase of 134% in just 3 months.
Staff loans stood at Kshs. 294 Million, reflecting 2 percent of Net Loans
The Bank of Kigali is also set to increase its lending to the private sector by 30% after the bank earlier this year secured a credit line from the French Development Agency (AFD)
The agreement obtained from the AFD is worth $20 million (Kshs. 1.8 billion) and has a guarantee fund of $6 million to support Small and Medium Enterprises (SMEs).
It provides a 10-year $20 million line of credit to the Bank with a two-year grace period at the interest rate equal to six-month US$ LIBOR (London Inter-Bank Offered Rate) plus 354 basis points. The credit line will be disbursed in tranches of up to $5 million drawn in advance and is meant to facilitate lending to the SMEs by the Bank.
As at 31st March 2011, the total retail accounts had grown by 14.3% to 74,145, in comparison to account numbers at 31st December 2010. Meanwhile, the corporate accounts grew by 37.4% to 11,858 for the same period. This shows that bank’s corporate clientele is growing at a faster rate than the retail one.
The ratio of total banking sector assets to GDP was approximately 22% in Rwanda in 2010, as opposed to 66% and 33% in Kenya and Uganda respectively, implying there is much room for growth
The Rwandan economy has grown by an average of 8.4% over the last 5 years (GDP), with the Services Sector of the economy contributing 47% of GDP.
The country has a Vision 2020 which aims to transform the country into a middle income country by 2020. By 2017, the Government aims to have extended financial services to 80% of the population, further demonstrating the huge void that lies in the Rwandan Financial Services sector waiting to be filled by Bank of Kigali and others
The retail interest rates of Bank of Kigali range from 17.25% to 19.25%. This is quite high. In Kenya, the average lending rate as at January 2011 was 14%. Thus, with the continued march of Kenyan banks into Kigali and other Rwandan towns, these interest rates might come under intense pressure. Equity Bank, whose mass market model has worked brilliantly in Kenya, is planning operations in Rwanda with the opening of a couple of branches in the next few months.
As we had seen in Part 1 of my analysis, the bedrock of Bank of Kigali’s business is the corporate scene which contributed 73% and 80% of the Total Customer Deposits and Total Loans Advanced by the Bank of Rwanda respectively. With the bank of Kigali quoting that 90% of Rwandans are unbanked, they should brace themselves for a massive battle with Equity Bank. Another Kenyan behemoth, Kenya Commercial Bank, has been in Rwanda since 2007 and is looking to tap into the country’s real estate sector. FINA Bank has been in Rwanda since 2004.
In winding up my analysis of Bank of Kigali, the following is a comparative analysis of the bank and Family Bank, a bank of similar size
BANK of KIGALI 2010 Kshs. | % CHANGE FROM 2009 | FAMILY BANK 2010 Kshs. | % CHANGE FROM 2009 | |
TOTAL ASSETS | 29.6 BILLION | +30.4% | 20.19 BILLION | +51.7% |
NET LOANS AND ADVANCES | 15.2 BILLION | +32.2% | 10.21 BILLION | +33% |
TOTAL DEPOSITS | 23.1 BILLION | +23.9% | 15.73 BILLION | +50% |
LOAN TO DEPOSIT RATIO | 65.6% | +3.9% | 64.9% | -8.3% |
TOTAL INTEREST INCOME | 2.45 BILLION | +20.1% | 1.9 BILLION | +38.2% |
TOTAL INTEREST EXPENSE | 625.6 MILLION | +22.6% | 226 MILLION | +13.6% |
NET INTEREST INCOME | 1.8 BILLION | +17.65% | 1.67 BILLION | +42.4% |
TOTAL OPERATING INCOME | 3.2 BILLION | +33.33% | 3.12 BILLION | +42.4% |
TOTAL OPERATING EXPENSE | 1.5 BILLION | +41.5% | 2.62 BILION | +41.7% |
COST:INCOME RATIO | 46.875% | +2.775% | 83.9% | -0.5% |
PROFIT BEFORE TAX | 1.66 BILLION | +23.9% | 501 MILLION | +46.1% |
PROFIT AFTER TAX | 924 MILLION | +16.8% | 391 MILLION | +76.9% |
Bank of Kigali has scooped many awards in Rwanda including the 2009 & 2010 Rwandan Bank of The Year in addition to being the being awarded the prize for Best Tax Payer for 8 years running from 2002 to 2009
However, the management would do well to cross-list the shares on the more vibrant Nairobi Stock Exchange to give the company some liquidity.
Announcement of allotment results will be on 12th August 2011
What are your analytical thoughts on Bk of Kig share performance thus far? 2012 price range?
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