KCB top management pay dropped 42 per cent last year helped by the departure of more than 10 divisional directors under a reorganisation meant to create efficiency in the business.
Details in the lender’s annual report show that the pay of senior staff fell to Sh216 million last year from Sh374 million — a sign that the bank is reaping from the review of the management ranks that cost it Sh98 million in termination costs.
The 2011 restructuring plan was led by global consultancy firm McKinsey & Company and was the first step to reduce the bank’s expenses.
The top and middle level lay offs staff followed other banks like Barclays, which made similar moves after an aggressive hiring phase started in 2007 in race for market share.
The exercise trimmed the bank’s executive team to less than 10 from 22 in a move that is expected to check staff costs that rose from Sh4 billion in 2006 to Sh9.3 billion last year, stifling profit growth.
“The bank had mentioned to analysts that it intends to reduce its cost to income ratio to about 50 per cent by 2015 and this will be achieved by growth in income and reduction of costs,” said an analyst at Kestrel Capital.
“The latest numbers show that KCB is doing well in meeting these targets.”
The drop in the senior staff pay comes as other banks continue to battle with a rising executive wage bill. For instance, Equity Bank’s management pay rose to Sh275 million last year from Sh197 million in 2011, reflecting a 39 per cent growth.
The divisional directors who quit the bank in 2011 included Mary-Ann Musangi (marketing), Tony Githuku (IT), Caroline Kariuki (mortgages), Tim Kabiru (retail) and Stanley Towett (finance).
Others were Sam Kimani (deputy CEO, group controls), Peter Munyiri (deputy CEO), Catherine Njoroge (special projects) and Kepha Bosire (corporate communications).
They paved the way for the hiring of Joshua Oigara, formerly finance director of Bamburi Cement firm, as its chief finance officer, before his elevation to CEO in January following the retirement of Martin Oduor-Otieno.
Mr Oigara has also deepened the restructuring efforts in a move that has seen top executives taken an early retirement, paving the way for the hiring a young team to guide Kenya’s largest bank.
Company secretary Kiprop Malakwen and director of audit Fred Mutiso have opted for the bank’s earlier retirement plan, prompting the lender to start an executive job search that will also fill the vacant positions of chief finance officer and chief business officer (Kenya).
The bank said it would cut its cost to income ratio -- a measure of efficiency-- from 57.4 per cent last year to lower than 50 per cent. The bank’s net profit grew 11.9 per cent to Sh12.2 cementing its position as Kenya’s most profitable lender.
Its share has outperformed the market to gain 75 per cent to Sh40 over the past year when the NSE returned 31.2 per cent.
The cost-cutting efforts are expected to be achieved by maintaining a leaner wage bill and use of technology-based channels such as ATMs, mobile, Internet, and agency banking.
The bank had a total of 5,162 employees as of December, down from 5,571 in 2011 with the Kenyan unit having the largest work force at 3,891.