DTB earmarks Sh150 million for expansion drive

Five branches will be opened in Kenya, two in Tanzania, three in Uganda, and one in Burundi where the bank has set up two branches since June last year.

This will bring the bank’s total branch network to 68, up from 57.

“We are going to use our capital to support the new branches for the first two years after which we expect them to break even,” said Ms Nasim Devji, the bank’s chief executive.

She said the expansion has been enabled by capital injections from shareholders in 2006 and 2007 which amounted to about Sh2.4 billion and further beefed up by Sh2 billion in 2008 from the International Finance Corporation, a shareholder in the bank.

The branch expansion is in line with the bank’s long-term growth strategy which seeks to have Diamond Trust Bank (DTB) operate in all major towns in Kenya and in East Africa, Ms Devji said.

Analysts expect the bank to use the expansion drive to bring in cheap retail deposits and retire the expensive fixed deposits it has been relying on to fund up to 65 per cent of its lending pool in the past three years.

This should increase profitability by boosting the net interest margin.

“DTB new branches are expected to haul in new deposits aided by the economic recovery and stimulus programmes intended to put liquidity in the hand of a wide cross-section of consumers. DTB’s strong relations with customers should also see it benefit from the positive incremental flows that businesses are currently beginning to enjoy,” reads part of a research note by Faida Investment Bank.

DTB plans to raise its total branch network to over 100 by 2012, a move that would mean higher reservations of earnings or issuing a new commercial paper in the debt market.

The bank focuses on serving small and medium-sized businesses.

The bank earned Sh1.2 billion profits in the six months to June compared to Sh586 million in a similar period last year.

Interest income grew to Sh3.5 billion, up from Sh3.1 billion on the back of increased lending.