Barclays CEO sets tough target for Kenyan unit

The Barclays Bank chief executive for Africa has set a target for the Kenyan unit to break into the top three lenders by revenue.

The Barclays Bank of Kenya (BBK) has in recent years taken a conservative approach choosing to grow its profit mainly by cost cutting rather than growth in its loan book.

The strategy has seen the lender slip from being Kenya’s most profitable bank to the fifth position by September last year figures.

Maria Ramos, the Barclays Africa CEO, told reporters that the bank “is aiming to be one of the top three banks by revenue in Kenya, Ghana, Botswana and Zambia,” according to a Reuters story.

As at September last year Barclays ranked fourth in revenues, the total of net interest and operating income.

KCB booked the highest revenue followed by Equity and Co-operative bank.

The target by the Africa boss poses a challenge to the management of the Kenyan unit who have to fight for lending opportunities in an increasingly competitive market.

Barclays is the only lender to have released full-year performance figures for 2013, revealing a 12.7 per cent drop in net earnings.

Kenya, Ghana, Botswana and Zambia are Africa’s four biggest markets outside South Africa.

The target is set to raise competition in the industry, with Co-operative Bank being the first on Barclays’ radar.

Co-op Bank ranks third in terms of revenues in the highly profitable industry, with total income of Sh21.1 billion in the nine months to September compared to Barclays’ Sh20.8 billion.

KCB is the market leader with revenues of Sh30 billion followed by Equity at Sh25.8 billion.

Last year BBK’s total income grew by two per cent, slower than the rise in operational costs that was attributed to staff restructuring expenses. This led to the decline in profits.

Barclays announced that it had ended its staff restructuring after cutting 500 jobs since 2010, even as its global CEO Tuesday declared that it will be cutting another 12,000 jobs this year mainly in the UK.

READ: Barclays ends staff restructuring plan after 500 job cuts

Between 2008 and 2012, Barclays had increased its branch network by two outlets compared to its rivals who have grown at a much faster pace.

“The earnings performance was lower than expected and our forecasts show BBK will continue to lag the sector in earnings and assets growth,” noted Standard Investment Bank in a note to investors, which, however, recommended they hold the bank stock at the Nairobi Securities Exchange.

Barclays intends to increase its presence in the SME business and has created an SME unit from its corporate banking unit to drive lending. This sphere has been used by local lenders to drive their business growth while Barclays focused on wealthier clients.

“We see SMEs as a growth potential and revenue stream moving forward. Historically, we’ve not been playing in the SME field,” said BBK chief executive Jeremy Awori during an investor briefing.

The bank’s projection is reflected in its loan book growth of 10.2 per cent, Sh11 billion in the second half of last year. This is the largest growth in the last five years when the lender’s books have remained static.

Barclays also took up bond trading in the second half of the year, a revenue stream it had given a cold shoulder in the past but one heavily exploited by its rivals.

The bank’s financials indicate it was active in the fixed income market, with securities held for dealing dropping to Sh814 million from Sh1.9 billion in June.

Other income, a line used to report capital gains earned during bond trading, grew by 72.4 per cent to Sh457 million.

Investors have continued to show faith in the counter with its share price Tuesday trading at Sh16.85 up from Sh16.60 on Thursday when it announced its results, including a 30 per cent drop in dividend payout.