Banque Populaire du Rwanda (BPR) is closing 20 branches and trimming the workforce as part of a strategy to reduce its soaring cost to income ratio that currently stands at 98 per cent.
The reforms, described as imminent by the management of the bank come nine months after the acquisition of BPR and merger with BRD Commercial, by Atlas Mara which made it one of Rwanda’s largest banks.
“We are at the level where if we continued without altering certain aspects, the bank would find it very difficult to remain competitive,” Sanjeev Anand, BPR’s chief executive officer said.
According to Mr Anand, the Bank has been operating below potential for the last eight to 10 years because of very high operational costs and inefficiencies that included failure to adjust the changing market dynamics.
“Since 2008 the cost to income ratio has been above 90 per cent which is clearly in the danger zone, because the correct ratio should be somewhere between 50 and 60 per cent,” Mr Anand said.
Internal assessment of the bank’s operation revealed that it was spending way too much on employees and on operations of its branches, a number of which were not turning a profit.
Reducing the number of employees is the number one priority in the restructuring blueprint that will also see the traditionally retail lender now seek a share of the corporate and SME market.
But this will also be accompanied with skills development to equip the bank to play in the new target segments.
According to sources the bank is undertaking an inventory of its complete skill base to retain people with the right skill for the new positions after realignment of existing ones and redefinition of existing roles.
The bank says it currently cannot estimate the number of employees who will be affected and would prefer keeping this information confidential until the final assessment is complete.
Sources in the bank however talk of hundreds, mainly those who were in positions considered duplicate.
“Communications have been ongoing with the staff, and we hear that about 230 employees are likely to lose jobs,” said an employee who did not want to be named.
Currently BPR has approximately 1,400 employees distributed in about 150 jobs across the bank’s 194 branches.
The first phase of the restructuring will begin at the end of November , while a second phase which the management says will affect the staff at the branches is set for early next year.
With a target to improve its cost to income ratio to at least 80 per cent by next year, the management plans a review of the bank’s network. Rationalising the branch network is expected to deliver a 5 per cent cost reduction each year.
“There are some branches where there is very little business, where we do not see much potential we will close a few of those but we may in addition open other new branches in other areas where we see it important,” Mr Anand added.
Mr Anand brushes aside analysts fears that this change of strategy to tap into corporate banking could prove costly for BPR, reasoning that retail banking will remain at BPR’s core although the means of delivery may change.
“Our network has been our strength and it will always be our strength. All branches might not continue to be run by us, we might have agencies for example but we will definitely have those outlets,” he says.