By BERNA NAMATA

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The Bank of Kigali Plc (BK ), Rwanda’s biggest local bank by assets, has reported a net income of $41.8 million (Rwf43.5 billion), reflecting an increase of 18.4 percent year on year, largely driven by the ongoing recovery of key sectors of the Rwandan economy.

In particular, Rwanda’s hospitality and service sectors have recorded a strong rebound this year due to the hosting key global events including the Commonwealth Heads of Government Meeting in June, and most recently the Global System for Mobile Communications Association Mobile World Congress which attracted over 5,000 delegates.

Releasing its third-quarter performance on Wednesday, the bank’s senior management said it has sustained an improvement in asset quality despite the current turbulent macroeconomic environment.

Total assets

BK’s total assets increased by 13.4 percent year on year to $1685.1 million (Rwf 1.755.6 billion) as of September 2022. 

“We have seen sustained improvement in our business across all the subsidiaries that have allowed us to post a net income growth of 18.4 percent. We believe this a very good performance mainly driven by loans, but also a lot of investment in inter-bank treasury because we have seen very good growth in our deposits,” said the bank’s CEO, Dr Diane Karusisi, while releasing the BK’s financial performance for the third quarter. 

Digital footprint

The growth in deposits, which increased by 21 percent year on year — the highest the bank has witnessed in recent years — is partly attributed to the expansion of its digital footprint which is linked to its recent upgrade of the banking software.

The bank’s client balances and deposits increased by 21.5 percent year on year to $1,081.6 million (Rwf1,127.1 billion) as of September 2022.

In February this year, Temenos, the banking software company, announced that BK, which currently has a 30 percent market share, had gone live on Temenos, replacing its core banking system. The upgrade has since allowed the bank to expand its digital channels.

“We have seen our teams very aggressive in mobilising deposits at an affordable cost because the cost of funding has remained almost flat on quarter to quarter at 3.8 percent. This gives us a lot of muscle to continue running the business,” Dr Karusisi said, adding that the bank has managed to mobilise significant deposits at an affordable rate using its digital platforms.

Net loans and advances increased by 4.4 percent year on year to $ 990.8 million (Rwf1,032.4 billion).

Cost of borrowing

The bank anticipates a rise in the cost of borrowing due to the tightening of the monetary policy despite the increasing uptake of loans by the private sector including manufacturing.

Rwanda’s Central Bank recently raised its lending rate to 6.5 percent, the third hike this year, to contain a drastic rise in the cost of living in the country largely driven by high food prices as well as external shocks including the impact of the war between Russia and Ukraine that has fuelled an increase in the prices of imported commodities including oil, gas, fertilizers and sunflower seed oils.

Positive outlook

“The outlook remains positive although the macro-economic conditions are not very favourable. The Central Bank increased its lending rate from 4.5 percent at the beginning of the year to 6.5 percent. We see the cost of funding increasing,” Dr Karusisi said.

BK plans to mobilise demand deposits to keep its cost of funds stable in the next quarter.

The Rwandan economy remains bullish as the composite index of economic activities expanded by 17.2 percent in the third quarter of 2022 compared to 10.0 percent recorded in the same quarter last year driven by the recovery in the services industry. 

The economy is now projected to grow by 6.8 percent this year, up from the initial projection of 6.0 percent.