Management of BCR says that the 10 percent NPL will be achieved this year
Commercial Bank of Rwanda (BCR) has reported a significant drop in its net profit from Rwf3.1 billion in the previous year to Rwf897 million in 2008.
The bank said that its pre-tax profit declined by 50 percent to Rwf1.7 billion in 2008 from Rwf3.5 billion in 2007, something the chairman attributed to the inadequacies in risk, credit and portfolio management competencies.
“This result is disappointing as the bank has in many ways made substantial progress in the year,” Nkosana Moyo, the bank’s Chairman told a news conference, shortly after the Annual General Meeting held at Hotel des Mille Collines on Wednesday.
On the operating basis, the bank said that in 2008 its costs increased by 18 percent, a two percentage difference higher than the 16 percent net revenue growth.
Moyo attributed the increase in costs to higher expansion expenses incurred throughout the year, as well as many unprofitable products the bank introduced last year.
He said: “This has been a difficult year for BCR but one from which I believe the bank emerges with renewed energy and strengthened management team.
“Product innovation comes with higher levels of risk compared to business as usual. This is especially true in the market not endowed with banking skills.”
BCR’s Non Performing Loan (NPL) portfolio currently stands at 26 percent of the total loan book, which is Rwf52 billion. The central bank wants a non performing loan of less than 10 percent.
Management of BCR says that the 10 percent NPL will be achieved this year but with achieved with provisions and write-off costs. The bank said it has hired an expert to help it in its loan recovery.
“The problems related to non performing loans are now receiving agent attention and we are confident that significant recoveries can be achieved in 2009,” the chairman said.
The bank whose staff number increased by 18 percent to 348 in 2008 is also facing stiff competition from the flourishing banking sector, which is also burden with liquidity problems.
The bank said that the entrant of the new players which include; Access bank, Kenya Commercial Bank and Rabokbank’s, Rwanda’s banking market environment has changed significantly.
“We welcome this competition and are confident that we can draw strength from it. More competition should be to the ultimate benefit of Rwandan customers,” Moyo said. He added that BCR will this year invest IT and also continue introducing new innovative products.
BCR is owned by Actis, a private equity investor in emerging markets with head offices in London and the government of Rwanda which is the minority shareholder with only 20 percent shares.
“We continue to be confident that BCR will rise above the recent difficulties and continue to improve the range and quality of its service to all customers in Rwanda,” Moyo said.