Bank of Kigali defies odds, posts $7m profit

Sunday June 3 2018

Bank of Kigali profits grew 9.4 per cent in the

Bank of Kigali profits grew 9.4 per cent in the first three month of 2018, from $6.4 million in the same period last year. FILE PHOTO | NATION 

By KABONA ESIARA
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Bank of Kigali Group has announced a net profit of $7 million in the first three months of this year. This is a 9.4 per cent growth from $6.4 million in the same period last year.

The growth comes at a time sector profits are declining as banks implement the International Financial Reporting Standard 9 (IFRS9).

The global rules require banks to make provisions for anticipated losses, putting pressure on capital levels and net profits.

The lender, which is listed on the Rwanda Stock Exchange, attributed the growth to core lending as well as fees generated by Bank of Kigali and its businesses BK General Insurance and BK Capital.

Net loans and advances grew by 12.1 per cent, the bank said, when it released its Quarter 1 financial results on May 29.

“This shows that we are giving out more loans than last year. We are also offering new products not only in the bank but also in insurance,” said chief executive Diane Karusisi.

During the quarter, BK Insurance’s underwriting revenue hit Rwf700 million ($806,381) driven by fire and motor vehicle insurance.

The insurer reported a net profit of Rwf80 million ($90,000) in an industry where the profits of private insurers have remained under pressure due to high claim rates and price wars.

BK Capital whose core business is to trade shares and provide custodial services posted Rwf38 million ($43,000) net profits for the group.

The bank’s total assets rose 14 per cent to Rwf755.2 billion ($874.6 million), while domestic deposits reached Rwf470.1 billion ($544.5 million).

Most profitable

Bank of Kigali is the most profitable among the 17 players in the Rwandan market.

Last year, the bank registered a net profit of Rwf23.3 billion ($27 million), a 12.5 per cent increase from 2016, according to its full-year results.

Total assets grew by 13.9 per cent to Rwf727.2 billion ($837 million) from Rwf638.3 billion ($734 million), while net loans and advances grew to Rwf471.7 billion ($542 million) from Rwf385.8 billion ($443 million).

Bank of Kigali plans to cross-list on the Nairobi Securities Exchange in the second half of this year as part of a drive to raise up to $70 million for investment.

In general, the Rwanda banking industry saw profits fall by 65 per cent in the first three months of this year as banks made less money from trading, paid more taxes and made provisions for loans.

National Bank of Rwanda’s January-March banking sector indicators show that industry profits plunged from Rwf11.1 billion ($13 million) in the first three months of 2017 to Rwf3.9 billion (4.5 million) over the same period this year.

“I imagine these losses have an element of non-performing loans, and an element of IFRS9 which comes with high impairments in the industry,” said the chairman of Rwanda Bankers Association, Maurice Toroitich.

Tax law

Bankers have also cited the Income Tax Law as a factor eating into profits. As per the law, the taxman does not recognise the anticipated losses which banks have to make provisions for.

“The biggest challenge with IFRS-9 is that we are not talking about specifics. It’s an extrapolation. So if a taxman stays at specifics, this is going to have a huge negative impact on banking because profits after tax are already low,” said Mr Toroitich.

Mr Toroitich said bankers are pushing the Ministry of Finance and Economic Planning to review the Income Tax Law in order to protect earnings in the banking industry and the entire economy. He fears that the low returns on capital in Rwanda could scare away investors.

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