Kenya's National eyes funding in fight for market share

By Duncan Miriri

NAIROBI (Reuters) - National Bank of Kenya will raise more than 10 billion shillings in a cash call next year to fund expansion and increased lending, its chief executive said.

Ranked number 12 out of 43 lenders in east Africa's biggest economy, National declined from a top-three lender in 1996, as its model of focusing on government banking and personal lending was upended by newer, nimbler rivals like Equity.

Munir Ahmed, appointed to lead the bank eight months ago from Standard Chartered, said the key goal was to double the bank's return on capital employed to between 20 and 25 percent.

National is targeting revenue growth, with greater focus on sectors such as home loans and business lending, and a sharp cut in its cost-to-income ratio.

"That will come from growing, very aggressively, the 8 billion shillings we had as revenue at the end of 2012 to 31 billion by 2017," Ahmed told Reuters.

"That is a 32 percent compounded annual growth rate over the five-year period."

The bank, which posted a 53 percent drop in profit last year, bucking the trend of profit growth across the industry, will centralise operations to cut costs and wastage.

"We have got cost-to-income ratio upwards of 70 percent. The aim is by December we should be down to no more than 65 percent and to push that down over the following 12 months to just over 50 percent," the chief executive said.

He blamed an over-concentration of lending to individuals for the profit drop in 2012, saying the bank is cutting back on personal loans.

Wary of higher default levels, the bank could not raise lending rates for small borrowers who accounted for 70 percent of total loans at a time when cost of funds soared due to a jump in official rates.

"We have cut it down, we are well on our way to achieve an end of year of reduction to no more than 35 percent of our balance sheet," Ahnmed said.

"That cushions from any impact of concentration on a very risky sector."

National, which is 70 percent owned by the government and the state pension fund, aims to double its profit this year, Ahmed said.

It will invest 400 million shillings in opening of 10 new outlets this year as well as acquisition of electronic channels like mobile phone and Internet banking.

It has also cast its eye on neighbouring countries.

"We are already looking at South Sudan, Somalia and Uganda as the first areas that we go in probably in that order," Ahmed said, adding it could open outlets in South Sudan next year.

Source: http://news.yahoo.com/kenyas-national-eyes-funding-fight-market-share-135238038.html

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