Bank of Kigali profits grew 9.4 per cent in the first three month of
2018, from $6.4 million in the same period last year. FILE PHOTO |
NATION
Bank of Kigali Group has announced a net profit of $7 million in
the first three months of this year. This is a 9.4 per cent growth from
$6.4 million in the same period last year.
The growth
comes at a time sector profits are declining as banks implement the
International Financial Reporting Standard 9 (IFRS9).
The global rules require banks to make provisions for anticipated losses, putting pressure on capital levels and net profits.
The
lender, which is listed on the Rwanda Stock Exchange, attributed the
growth to core lending as well as fees generated by Bank of Kigali and
its businesses BK General Insurance and BK Capital.
Net loans and advances grew by 12.1 per cent, the bank said, when it released its Quarter 1 financial results on May 29.
“This
shows that we are giving out more loans than last year. We are also
offering new products not only in the bank but also in insurance,” said
chief executive Diane Karusisi.
During the quarter, BK Insurance’s underwriting revenue hit
Rwf700 million ($806,381) driven by fire and motor vehicle insurance.
The
insurer reported a net profit of Rwf80 million ($90,000) in an industry
where the profits of private insurers have remained under pressure due
to high claim rates and price wars.
BK Capital whose
core business is to trade shares and provide custodial services posted
Rwf38 million ($43,000) net profits for the group.
The
bank’s total assets rose 14 per cent to Rwf755.2 billion ($874.6
million), while domestic deposits reached Rwf470.1 billion ($544.5
million).
Most profitable
Bank of Kigali is the most profitable among the 17 players in the Rwandan market.
Last
year, the bank registered a net profit of Rwf23.3 billion ($27
million), a 12.5 per cent increase from 2016, according to its full-year
results.
Total assets grew by 13.9 per cent to
Rwf727.2 billion ($837 million) from Rwf638.3 billion ($734 million),
while net loans and advances grew to Rwf471.7 billion ($542 million)
from Rwf385.8 billion ($443 million).
Bank of Kigali
plans to cross-list on the Nairobi Securities Exchange in the second
half of this year as part of a drive to raise up to $70 million for
investment.
In general, the Rwanda banking industry saw
profits fall by 65 per cent in the first three months of this year as
banks made less money from trading, paid more taxes and made provisions
for loans.
National Bank of Rwanda’s January-March
banking sector indicators show that industry profits plunged from
Rwf11.1 billion ($13 million) in the first three months of 2017 to
Rwf3.9 billion (4.5 million) over the same period this year.
“I
imagine these losses have an element of non-performing loans, and an
element of IFRS9 which comes with high impairments in the industry,”
said the chairman of Rwanda Bankers Association, Maurice Toroitich.
Tax law
Bankers
have also cited the Income Tax Law as a factor eating into profits. As
per the law, the taxman does not recognise the anticipated losses which
banks have to make provisions for.
“The biggest
challenge with IFRS-9 is that we are not talking about specifics. It’s
an extrapolation. So if a taxman stays at specifics, this is going to
have a huge negative impact on banking because profits after tax are
already low,” said Mr Toroitich.
Mr Toroitich said
bankers are pushing the Ministry of Finance and Economic Planning to
review the Income Tax Law in order to protect earnings in the banking
industry and the entire economy. He fears that the low returns on
capital in Rwanda could scare away investors.
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