Rwanda’s Banque Populaire, which is part of the Atlas Mara Group, says it will not be reducing its branch network as earlier planned under a business reorganisation programme, saying it feared the move would be giving away its strongest competitive advantage in the market.
Late last year, BPR announced its intentions to close up to 20 branches and reduce its staff as part of a wider strategy to reduce a soaring cost-to-income ratio that stood at 98 per cent. The bank now says it will open new branches in new locations to compensate for any closures.
“BPR has 194 branches and we intend to maintain most of them, but there are a five or six that are in an area with poor customer traffic, which we decided to close. But, we are opening new branches in busier locations, like the one at Kisementi,” said Sanjeev Anand, BPR’s chief executive officer.
However, sources say BPR’s planned closure of branches especially in loss making rural locations was blocked by the central bank, something that Mr Anand denied.
“We want to establish ourselves as the largest bank, with the biggest branch network, serving both the retail and SME segments. Our network will remain, it’s just about rationalising,” he said.
The reforms come nine months after the acquisition of BPR and its merger with BRD Commercial by Atlas Mara — making it one of the largest lenders in the country with a combined asset base estimated at $325 million.
Mr Anand had earlier said that they would have to alter certain aspects of the business or the bank would find it difficult to remain competitive. But he now says that, “Having many branches all over the country is our biggest competitive advantage.”
Atlas Mara inherited a bank that was underperforming, with high operational costs and a number of inefficiencies. Since 2008 the cost to income ratio had been above 90 per cent yet a healthy ratio should be between 50 and 60 per cent.
Reports show that in the first nine months of 2015, BPR’s profits fell to Rwf395.1 million from Rwf864.3 million in the same period in 2014.
As part of its business re-organisation, the bank laid off over 300 employees, many of whom lacked the needed skills and competencies to move forward with the bank, which is aggressively digitising.
The banking sector has been striving to reduce expenses while deepening their customer services, which has sometimes proven difficult to achieve.
“There is no right or wrong way and the strategy depends on each individual bank. Having national representation based on branch network could be their [BPR] business model and they decided not to change that. Maintaining the branches could be in line with the bigger scheme of their strategy,” said Maurice Toroitich, the managing director of KCB Rwanda, and president of the Rwanda Bankers Association.
Rwanda’s banking sector faces exposure to foreign exchange losses incurred from external borrowing after the dollar gained sharply against the local unit — a situation experts predicted would lead to reduced margins for commercial banks.
Mr Toroitich said banks that have borrowed externally over the years have been exposed to currency losses.
“At the moment we have very small external borrowing and whenever we do, we hedge our borrowing so that we are not exposed to these losses,” Mr Anand said, when asked about the extent at which currency losses have affected BPR.