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Why Barclays plans to close 7 branches

Thursday, July 06, 2017 — updated on December 11, 2020 - 7 min read

Barclays Bank of Kenya chief executive Jeremy Awori. PHOTO | DIANA NGILA | NMG

Barclays Bank of Kenya (BBK) #ticker:BBK this week announced plans to shut down seven of its branches beginning October 1, raising fears that hundreds of jobs in the targeted units may be lost. The bank last month also rolled out a voluntary early retirement scheme that is expected to get about 130 people from its payroll as it moves to trim costs. The Business Daily talked to the bank’s chief executive, Jeremy Awori, on the road ahead and how the lender plans to navigate the tough business terrain. Here are the excerpts.

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Technically what we are doing is merging branches. We have invested significantly in overall infrastructure over the last three or four years. That was done to ensure we remain relevant to customers. For example, we have replaced over 230 ATMs. We have invested in Internet banking, mobile banking and you have seen agency banking. We want to make banking convenient for customers in line with what they want. We have seen over time a change in our transaction profile where we probably had 20 or 30 per cent of transactions going through alternate channels and that number is almost 70 per cent. Essentially what that has meant in real terms is that transactions going through branches have been on the decline. So it was not efficient to have some of these branches like in the case of Moi Avenue [in Nairobi] where just a few metres away is Queens Way branch, which is also a bigger branch.

To a certain extent that may be manifesting because before, the CBR was an indicative rate. It wasn’t the rate at which lending was based. Now they’ve linked the two. And now you’ve got this challenge where you have inflation growing and typically once inflation grows they would increase rates to help manage inflation. Now in this instance people are saying, is there a conflict? By increasing interest rates are you going to slow down credit growth even further? There is a school of thought that actually says if you increase interest rates maybe more lending will happen, not less lending because you get a better return than you did with lower interest rates. That is something the central bank has to grapple with. The CBK is worrying itself with monetary policy and I think they are quite astute about this risk. I am sure there will be a review over time as to what is the most effective benchmark to use to price lending.