Burden of bad loans on Rwanda’s listed lenders

Tuesday December 19 2017
Bank hall

A Bank of Kigali banking hall. The lender has reported a profit of $20.6 million in the first nine months of 2017, up from $19.4 million last year. PHOTO FILE | NATION


Banks listed on the Rwanda Securities Exchange have reported a difficult business environment that has seen the stock of bad debt rise in the first nine months of the year.

The combined profitability of the four banks — Equity Bank Rwanda, KCB Bank Rwanda, I&M Bank and Bank of Kigali — increased by 10.7 per cent, but high credit risk was evident as non-performing loans hit $43 million.

“This year was not good for us at Equity Bank. We had very small investments. But we have done a good job in cleaning our assets,” said Hannington Namara, its managing director.

Financial results released at the beginning of December show the four listed lenders reported a combined profit of $32 million, from $28.9 million recorded from January to September 2016.

Equity Bank Rwanda reported a $2.9 million profit, from $2.3 million during the period under review while KCB Bank Rwanda recorded a $2.6 million profit, up from $1.6 million.

KCB attributed this growth to fees and commissions and more prudent management of its expense lines.



The bank also reduced its non-performing loan ratio, bringing it below the 5 per cent benchmarked by the National Bank of Rwanda (BNR). Its bad loan portfolio dropped from $8.7 million in the first nine months of 2016 to $4 million this year.

“This reduction is attributable to initiatives we implemented from 2015 to date around credit underwriting, monitoring and getting close to our borrowers to support them whenever signs of a struggle begin to show. The benefits manifested more in the first nine months of 2017,” said managing director George Odhiambo.

Bank of Kigali reported a profit of $20.6 million in the first nine months of 2017, up from $19.4 million during the same period last year.

I&M Bank Rwanda posted a $5.6 million growth in its net profit, boosted by high growth in interest on loans and government securities, which grew by 13 per cent.

The central bank said that bad loans are expected to ease in coming months. As of November, they had dropped to 7.2 per cent, a positive outlook that is likely stimulate more credit to the private sector, according to Peace Uwase Masozera, director-general of the Financial Stability Directorate at BNR.

But some lenders have registered losses and instituted cost-cutting measures. The banks have also shelved the opening of new branches.

Sent packing

At least 50 employees at pan-African lender Ecobank are set to be sent packing, especially from its upcountry branches in Rubavu, Muhanga, Musanze, Nyagatare and Rwamagana.

The bank attributed its losses to loan provisioning as bad loans increased.

Data from the National Bank of Rwanda shows that the banking industry has reduced its branches from 521 in June 2015 to 440 as of June 2017, but agency banking had grown to 3,547 branches as at June 2017.

I&M Bank’s plan to build upcountry branches announced during its initial public offering this year may not come to fruition, with Robin Bairstow, managing director, saying that they no longer need branches as “they cost a lot of money.”

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