KCB sheds 120 jobs as three-year layoff plan ends

KCB Group has shed 120 jobs at a cost of Sh1.2 billion as the lender closes a three-year restructuring plan aimed at reducing its wage bill.

The bank in February 2010 launched an ambitious plan to trim its workforce by nearly 1,000 to reduce its cost- to- income ratio, which was the highest then among the top-tier banks.

Group chief financial officer Collins Otiwu said on Friday that the voluntary retirement plan will be closed next month after the bank achieved its target.

“As a bank we decided to give a soft landing to our staff hence the introduction of the voluntary retirement programme that has this year alone cost the bank Sh1.2 billion,” added Mr Otiwu.

The plan has left KCB with slightly more than 5,000 staff from last year’s 5,162.

The retrenchment plan aimed at slowing down KCB’s ballooning wage bill to re-energise profits growth.

The bank’s wage bill increased from Sh3.8 billion in 2005 to Sh6.9 billion in 2009 while its staff numbers from 2, 715 in 2005 to 5, 492 at the close of 2009.

The job cuts were informed by the efficiency gains that the bank has made with technology-based service delivery channels such as ATMs, mobile, and Internet banking as well as merger of some departments.

“Given its already expansive branch network (236 branches), the completion of three years of restructuring and roll out of multiple client transaction channels, the responsibility to grow business volume now squarely rests on management,” Standard Investment Bank told their clients after the release of KCB’s quarter results.

In July, KCB tapped former Equity Bank executives in a management shake-up that has seen the bank fill six positions under its new organisational structure.

Samuel Makome and Mr Otiwu, former Equity managing director in Tanzania and finance director respectively, were appointed KCB’s head of Kenya business and CFO respectively. 

These are the first major changes in KCB’s executive suite since Joshua Oigara replaced Martin Oduor-Otieno in January as chief executive.
The bank has previously stated that a reduction of the cost to income ratio and an increase in profit from regional businesses were among its key goals for the year. Its cost to income ratio fell to 52.1 per cent during the nine months to September from 57.4 per cent last year, the bank said.

“We are not happy with our cost to income ratios but we expect that cost management measures we have put in place will improve our position and close at this year’s target of 51 per cent,” said Mr Otiwu.

KCB had been struggling to reduce its costs to income ratio, which is one of the highest in the industry, with the rising wage bill emerging as a headache for the bank.

The KCB restructuring plan ends Kenyan banks are increasingly looking at reducing their staff and payrolls to trim the excess fat and grow profits.

Barclays Bank of Kenya has also shed hundreds of jobs while other top banks such as Equity and Co-operative have gone slow on hiring opting to support branch expansion with current staff.

The lenders are betting on agency banking to further lower their staff count.
KCB Group posted a 15.4 per cent per cent rise in net profit to Sh10.8 billion for the period to September helped by cheap deposits and improved earnings from its foreign subsidiaries.

The bank’s deposit costs dropped to Sh5.8 billion from Sh8.7 billion, translating into savings of Sh2.9 billion that is higher than the additional profits of Sh1.5 billion.

This was backed the near doubling of profits of its foreign subsidiaries in Tanzania, Rwanda, Uganda, South Sudan and Burundi whose profit stood at Sh1.33 billion from last year’s Sh680 million.

The bank’s share last Thursday remained unchanged at Sh48.50 and having gained 65 per cent over the past year.

[email protected]