Bank of Kigali, Rwanda’s largest lender by assets, plans to enter the Ugandan market next year in an investment move estimated at $10 million.
The bank is targeting the growing business activity within the East African Community.
“There are opportunities in the region; with the integration of the East African community, our customers are constantly trading in those markets,” chief operations officer, Lawson Naibo told Rwanda Today.
Bank of Kigali will become the first local bank to make an investment of this magnitude outside Rwanda. The bank is also in the final stages of opening representative offices in Kenya.
Last year, Bank of Kigali raised about Rwf20 billion through its initial public offering and has secured credit lines to finance its expansion both within Rwanda and in the EAC region.
The bank secured $20 million from French Development Agency and $12 million from African Development Bank in addition to $6.4 million from the European Investment Bank.
Sources said the bank is planning a rights issue to raise additional capital. Mr Naibo said this is subject to shareholder’s approval.
Meanwhile, Bank of Kigali has established a wholly-owned subsidiary, BK Securities Ltd, to offer brokerage services as it seeks to grow its revenue stream.
This is part of a model the bank adopted in 2009 where it seeks to offer a variety of services including insurance.
“We would like to have a one stop shop where we offer capital markets services, money market service or insurance all at once,” Mr Naibo said.
By expanding into brokerage services, Bank of Kigali is leveraging on the large number of shareholders attracted by its IPO. The bank attracted 6,720 retail shareholders, three quarters of whom bought shares directly from the bank without seeking the services of brokers.
According to management, this translates into potential clients. The bank has been acting as a custodian.
Given the big numbers, BK Securities is likely to be one of the dominant players in the nascent industry. The number of retail investors on the Rwanda Stock Exchange is estimated at 10,000.
“When you pioneer such initiatives then you grow as the market grows; we envision a time when many Rwandans will be participating in the stock exchange. There are various opportunities; there are many corporate and SMEs that would be willing to list on the Rwanda Stock Exchange,” said Mr Naibo.
Net income rises
Last week, BK reported that its net income rose to Rwf8.9 billion ($14.5 million) in the first nine months of this year, an increase of 53.4 per cent year-on year, driven by growth in interest income.
Its net interest income accelerated by 36 per cent to Rwf15.8 billion ($25.3 million) in the nine months of this year from Rwf11.6 billion ($19. 3 million) in the same period last year, supported by expansion of its loan book.
Non-performing loans —loans in default or close to being in default— eased to 6.8 per cent from about 19.4 per cent in 2007, thanks to internal tight liquidity management practices and improved regulatory environment by the central bank.
On a quarterly basis, its assets declined by 0.4 per cent to Rwf311.6 billion ($508.9 million) — a direct result of the bank’s move to tighten credit.
Local banks are tightening their credit risk management, which may translate into a slow growth of credit to the economy