Bank of Kigali denied a piece of Uganda market

Friday May 10 2013

PHOTO | FILE Bank of Kigali offices in Rwanda.

Bank of Kigali offices in Rwanda. The bank has put on hold plans to establish a representative office in Kampala because Ugandan law does not provide for such an investment. Photo/FILE NATION MEDIA GROUP

By ALEX NGARAMBE Rwanda Today

Bank of Kigali (BK) has put on hold plans to establish a representative office in Kampala because Ugandan law does not provide for such an investment.

Ugandan banking law, unlike in Kenya, has no provisions for a foreign bank to open a representative office. The law only allows a fully fledged bank.

Early this year, Bank of Kigali established a representative office in Nairobi to act as a liaison for interested investors in Kenya and the region, making it the first local bank to invest outside Rwanda.

Rwanda’s biggest bank in terms of assets now lives in hope that the law will be changed soon to enable it to set up an office in Uganda.

The bank also said quick harmonisation of the East African Community capital requirements would remove the hurdle.

“We are not going to Kampala as of now because of the laws restricting us, but we are now studying the environment to see what to do in future,” said Lawson Naibo, the bank’s chief of operations.

Investment plan

The bank had planned to invest at least $10 million in the Ugandan market to tap into the increasing business opportunities in the region.

“We can only hope that the EAC monetary union is fast-tracked because it would also facilitate the harmonisation of capital requirements making it less expensive to invest in member countries,” added Mr Naibo.

When the bank issued its initial public offering in 2011, it raised about Rwf20 billion and has also secured credit lines to finance its expansion both within Rwanda and in the region.

The bank secured $20 million from the French Development Agency, $12 million from the African Development Bank and $6.4 million from the European Investment Bank for expansion.

Sources said the Bank is planning a rights issue to raise additional capital. However, Mr Naibo said this is subject to shareholder’s approval.

The suspension of the Uganda expansion plan leaves both the bank and business community from the two countries with limited options since Rwanda is one of Uganda’s leading trading partners and hosts a sizeable portion of Ugandan population.

Last week, the bank paid Rwf5.9 billion ($8.8 million) in dividends, translating into a 4.5 per cent dividend yield based on the current share price of Rwf195.

While last year, dividend pay out was estimated at Rwf4.1 billion ($ 6.8 million), this resulted in Rwf6.2 per share, or an a 5 per cent dividend yield based on the then share price of Rwf125.

After the successful listing of the bank on the Rwanda Stock Exchange in 2011, the board of directors decided to increase the dividend levels by 50 per cent for shareholders.

“Our profit this year increased by 34 per cent and this is the reason why shareholders will earn more than last year,” said James Gatera, chief executive officer of Bank of Kigali.

The bank last year also registered net income after tax of Rwf11.8 billion, up by 35.6 per cent year-on-year, while deposits reached Rwf208.4 billion rising by 2.7 per cent quarter-on-quarter and 15.1 per cent year on year.

The bank’s assets

The bank’s total assets stood at Rwf322.8 billion, up by 3.6 per cent quarter-on-quarter and 12.1 per cent year-on-year.

In 2011, Bank of Kigali became the second domestic company to be listed on the Rwanda Stock Exchange after Bralirwa, the leading beer and beverage manufacturer.

By December last year, the bank claimed 32 per cent market share with 59 branches across the country and five mobibanks to provide retail and commercial banking services to over 190,000 individuals and 13,000 companies.