Kihara Maina, CEO, I&M Bank Kenya during the interview at the lender's offices on January 28, 2022. PHOTO | DIANA NGILA | NMG
Five years ago, I&M Bank set off a series of acquisitions. Then it went silent until last year when it acquired Uganda’s Orient Bank in April.
I&M Bank Kenya CEO Kihara Maina explains what looks like a cautious growth strategy amid aggressive moves by its Tier 1 peers in the region.
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WHAT IS THE EXPECTED IMPACT OF THE ACQUISITION OF UGANDA’S ORIENT BANK ON THE OVERALL PERFORMANCE OF THE GROUP?
Presently, the operation that we have now acquired in Uganda is in the process of being integrated into the Group. In terms of positioning for I&M Uganda, now it's already been rebranded. It gives us a long-coveted presence in Uganda.
We have been chasing that opportunity to get into that market for over five years. We managed to complete the transaction last year.
The second thing, it gives us an opportunity to grow the balance sheet and profitability of that business. We position to be one of the top five in every market we operate in as part of our Imara strategy.That is going to give our customers who we have been supporting as they do their business in the region in Uganda; it gives us a footprint to be able to support them locally. That makes quite a difference because people on the ground then understand the issues our clients in that market may be facing.
That means with presently, with I&M Uganda which has just under 2.5 percent market share is ranked 12 in the market, our opportunities will be to see then how do we scale that business in terms of growth either through customers acquisition and wider product offering.
It means looking at how we can grow organically and inorganically and then make sure it is a meaningful contributor to the group.
THE GROUP PAID SH4.1 BILLION LAST YEAR FOR THE 90 PERCENT STAKE. HAVE YOU COMPLETED THE BUYOUT AND HOW MUCH HAVE YOU PAID?
These things take a bit of time. The agreements that we put in place when we do such transactions call for a period when you are going to be assessing whether all sorts of completion milestones have been met.
Because when you are doing the transaction you are looking at the books and what you might get later on as you do the business may need some changes here and there. That is still underway.
WHAT DO YOU EXPECT TO PAY?
Not much variation from what we had done. We expect that within the next few months we should have a clear picture of any further adjustments that may need to be met.
WHAT ARE THESE MILESTONES YOU EXPECT TO SEE BEFORE YOU COMPLETE THE BUYOUT?
They tend to be about asset quality and any other consideration around any liabilities that existed that we were not aware of or had not been disclosed. Those kinds of things. Those that we have warranties for.
DO YOU INTEND TO BUY THE 10 PERCENT FROM THE MINORITY SHAREHOLDERS?
Well…(long pause) The position we take is that we want to have a majority in a business we acquire. How we like to go in. Now, of course, this acquisition was done at a time when there was a lot of uncertainty in the markets.
The retention we had from local shareholders is going to be their discretion to decide how they want to deal with it. They can sell to the group or other parties. There are shareholders’ agreements that govern that.
Any adjustment that may need to be made from a shareholder position is obviously governed by these agreements. How it will turn, I don’t know.
DO YOU PLAN ON ANY OTHER ACQUISITION IN THE REGION?
We are always looking. Our strategy calls for us to achieve scale in every market we operate in. Our aspiration is to be Eastern Africa’s leading financial partner for growth. We are always scouting for opportunities to see whether there can be a fit for our group.
Our customers already do business in a lot of Eastern African countries and what they would want is for us to support these in those markets. Hence why we were chasing a position in Uganda.
From that perspective, geographically we would be keen to see opportunities that open in markets of interest but at the same time if there are opportunities to grow inorganically and scale that is something we would also look at.
OTHER TIER 1 BANKS HAVE BEEN AGGRESSIVE IN ACQUISITION IN THE REGION. WHY IS I&M SLOW?
Well…so…Actually, I am not sure why you say we are slow. I get what you may be considering is moves that have happened in Kenya and around the region.
But if you look at acquisitions activities and go back at least five years, they started with us. Our acquisition of Giro banks started off this round of acquisitions.
We have just recently acquired the business in Uganda. We wouldn’t say we are slow, what we are is very considered. We look at our target opportunities and are very thorough in assessing whether or not the right fit before making a move.
Merger and acquisitions activity isn’t necessarily a quick response thing. We have to look at the strategic fit. We have a very clear strategy and where we want to be and how we will go about it. So when opportunities arise, we consider them carefully. So we don’t do me too things.
COMING BACK TO KENYA, WHAT ARE YOUR PLANS TO INCREASE MARKET SHARE CURRENTLY AT 5.3 PERCENT BASED ON CUSTOMER DEPOSITS?
We have rather been concentrated in the past in corporate banking, and we are certainly one of the big players in this segment. We continue to entrench our business there. But we have always known that we need to extend our offering into business banking; SME space; frankly that is where the growth is.
We have a network present of 40 branches in the country and a structured offering for that space. We are also looking at personal and premium banking space.
However, the key pillar of driving is how we will access these clients. It will be a combination of geographical reach and effective channels on the digital side. We have made one of the largest investments in this market in terms of digital banking platforms.
This allows us to acquire customers with a less costly footprint and scale quickly while giving insights into the customers we are dealing with.
That’s how we look on entrenching ourselves further in this market; looking both on the deposit gathering side through the platforms and how we will help with financial solutions spanning borrowing, insurance, wealth management.
IN MAY, I&M RECEIVED A SH5.4 BILLION IFC LOAN FOR LENDING TO SMES, HOW MANY CUSTOMERS ARE UNDER THIS PROGRAM AND HOW MUCH HAVE YOU LENT SO FAR?
We have been working a lot on rolling out the programs that are going to be supported by this money. So we had to do a lot of groundwork around that and make sure that we do the capacity building; you don't just give them money, right? And these are some of the conditions supporting this.
Preliminary numbers in terms of utilisation, sure, we are on 10 percent of that entire sum. But we expect that it's going to grow quite rapidly now that the economy is opening up.
HOW IS THE PERFORMANCE OF BANK ONE IN MAURITIUS?
Very well. They have had quite a significant turnaround and were very prudent in 2020 dealing with some corporate client challenges that affected the non-performing loans (NPLs) positions, but they have managed to come out of that very effectively. So we are very happy with the performance.
WHAT SHOULD EXPECT AS YOUR NPLS POSITION FOR 2021?
Well, we cannot obviously disclose. We are just about to do our reporting. But it has certainly been improving throughout the year.
Despite the conditions under which we were operating in 2021, it was a lot more difficult to ensure that recoveries needed to happen were happening. But we have had good progress. So you will see the numbers when they come out.
The industry has been carrying out loan recoveries processes. What is the progress on your end?
It has been challenging because the economic performance even though we have been seeing the economy opening up, some of the effects on businesses have lagged.
When the measures taken as an industry to support businesses in 2020 fell away in March 2021, we saw businesses showing the true position on resilience. Overall, it has been commendably managed by the industry.
We have seen improvement in recoveries across the industry seeing that even from when their measures came offline. And I think banks have been very good at supporting clients, and certainly attain at I&M have very closely following what our customers need to be able to support them as they recover.
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