NCBA Group's managing director, John Gachora, discusses the 2023 performance of his bank and the banking industry in general. While there have been record profitability and increased dividends, there has also been a decline in asset quality due to the rise in non-performing loans.
Gachora mentions that some banks have made significant provisions to account for risks within their portfolios. He explains that not every interest rate hike is passed on to customers and that negotiations with customers who can't afford certain conditions have taken place.
In relation to non-performing loans (NPLs), Gachora believes that the sector will handle them better this time around after navigating through the challenges of the pandemic. He anticipates a slight increase in NPLs initially due to heavy provisions made by some banks, followed by a gradual reversal.
Regarding write-offs from the loan book amounting to Sh12 billion, Gachora clarifies that this is to clean up the bank's balance sheet, emphasizing that even if a loan is written off, collection efforts continue.
In terms of forex liquidity and the exchange rate, Gachora comments on the improvement seen. He mentions factors like significant inflows of dollars through infrastructure and Eurobonds, which have influenced the shilling's performance. Gachora predicts a potential resurgence in demand for dollars as trade activities pick up, ultimately affecting the shilling's value.
Gachora attributes the profitability of NCBA's Tanzania subsidiary to various factors such as cost-cutting measures, business growth with large corporations, and recoveries from provisions and write-offs made in the past.
On the topic of expansion and acquisitions, Gachora mentions the possibility of future mergers or acquisitions but clarifies that there are no immediate plans. He also discusses the integration of planned acquisitions like AIG Kenya as standalone subsidiaries. In terms of NCBA's expansion plans, Gachora indicates a gradual approach with future considerations for agency banking.
Gachora highlights the creation of jobs in areas such as customer experience, IT, and digital business within the banking sector. He mentions a focus on Loop, where staff numbers have increased significantly.
Lastly, Gachora acknowledges the industry's dynamic nature and hints at the potential for more mergers and acquisitions, indicating that Kenya may see further industry consolidation in the future.