NAIROBI - Despite regional expansion and uncertainty over the Southern Sudan referendum, the KCB Group is optimistic that business can only get better.
Chief executive officer Martin Odour-Otieno explained that going by the bank’s huge profits up to the third quarter of this year which has already surpassed 2009, things are looking up for the economy.
The top four banks in Kenya have reported huge profits of more than Ksh6 billion ($75 million) for the period up to September, with KCB making Ksh6.5 billion ($81.25 million).
Mr Otieno said that although businesses are cautious about the Southern Sudan referendum slated for January 2011, the bank has chosen the optimistic path given that it is the most visible financial institution in that region where it has presence in every town.
“We are everywhere in Southern Sudan,” he said, adding that some of their branches are located in the towns where fear is rife that they could flare up during the referendum.
“Sudan has been profitable since we set up shop there despite the challenges of its being an expensive environment for businesses,” he said.
KCB was the first international bank to foray into Southern Sudan four years ago after the signing of the Comprehensive Peace Agreement when calmness returned to the area after more than 20 years of civil war.
Owing to the reconstruction work as people started going back home and a big non-governmental organisation and development agencies community, a conducive environment for business was created and KCB got there on time, Mr Otieno said.
Although many other banks including Equity Bank have since set up base there, it still remains an important region, he added.
The first hurdle in setting up a bank in Southern Sudan is the huge capitalisation of $25 million.
“Compared with Kenya’s $3 million, Sudan is costly,” said Mr Oduor-Otieno, disclosing that KCB negotiated for $15 million raised in three years, but the returns have been 100 per cent.
Southern Sudan is now home to banks from all over the continent — Egypt, Tanzania, Ethiopia — and counting.
Generally, Mr Oduor-Otieno says, the banking environment in East Africa is dynamic and vibrant even in countries like Tanzania that have more stringent regulations especially on labour.
KCB has been in Tanzania for 12 years but the more recent expansions like in Southern Sudan, Uganda and Rwanda are doing better.
Uganda, he says, is a mature market like Kenya where competition is stiff calling for innovation to make profits.
The bank’s Ugandan subsidiary is on track and expected to start making profits next year.
“KCB Uganda has followed the road of green fields that take two to three years to break even. It has broken even and we expect it to make profits from next year,” he said.
The bank has been in Rwanda for two years and reports thriving business there courtesy of the country’s openness to foreign investment and ease of doing business. KCB Rwanda is expected to also make money next year.