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Going against the grain

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While others are closing theirs, NIC insists bank branches are crucial to its growth plan.

By Tullah Stephen

Kenyan banks have over the last few months accelerated the pace at which they have shut down their branches. The move has been attributed to the need to cut operational costs in the wake of digitization and after effects of the law capping interest rates.

While this persists, National Industrial Credit Bank (NIC Bank) is however investing in more brick-and-mortar branches. This continued investment stands in direct contrast to its peers as more consumers switch to mobile and online channels. The Bank closed the year with a branch network of 37, and has already opened an additional 4 branches in 2018, bringing the total number of branches to 41.

Robert Kibaara, the Bank’s Director of Retail banking, says the bank is on a mission to implement its strategic plan that is geared towards further growing its foothold across the country. Since 2015, the bank has been shifting its focus towards the Retail and SME segment. The move is aimed at ensuring future sustainable growth and returns.  He says for budding banks such as NIC, physical presence is essential as it brings the optical value and aides in acquisition of new customers and doing more business with the existing ones.

NIC Bank has already opened four new branches in Watamu, Malindi, Diani and Kilifi in the coastal region of Kenya. The exercise cost the lender Ksh57 million. The move to open new branches at the Coast according to Mr Kibaara, was due to the region’s growing business environment spread across the various sectors.

“These areas were key for us as we just launched when Imperial Bank collapsed. We were able to at least inherit over 4,000 customers as a result of this.”

Robert Kibaara, NIC Bank Director of Retail Banking

Despite the growing use of technology and the fact that many of the account and transactional services branches provided have gone the digital way, Kibaara says branch locations remain an asset for customer’s need. “While it may look old fashioned, but branches offer experiences that no mobile device or computer can offer. There is always a psychological comfort of having a branch in a certain location.”

He adds that customers still continue to prefer opening accounts in person while getting consultative services. For banks, branches remain an effective channel for gathering low-cost, core deposits.

In addition to new branches, Mr Kibaara says the bank continues to revamp their branch strategies. He explains that this will include improving experiences inside the braches seeking to give facelifts to its existing branches in a bid to enhance customer experience. “We are looking to create experiences where customers can come in and feel at home and have a friendly conversation with our team.”

“We are entering a new ambitious five-year strategic journey. The 2018 – 2022 journey is critical as it is intended to refocus our efforts to become the most customer-centric financial services institution and ‘go-to’ thought leader in the arena of financial and business advisory services.”

Mr Kibaara says mobile banking and the likelihood of competition from fintech has been one thing to lookout for. Banks can no longer operate as monoliths, trying to do everything themselves.

According to Kibaara the growth of fintech is a good thing since it fosters innovation and the end winner is the customers. Banks and fintech ought to collaborate more rather than compete. Banks have capital and they can be able to do way more than fintech lending at their own pocket. They also have a long history of risk management and have an upper hand.

Products offered by fintech collaborating with banks, he explains, have their risk management little bit tighter and better. Thus benefit is transferred to customers.

“The approach we (NIC Bank) have taken is not to buy a fintech. No single fintech is a powerhouse for everything, the best thing is to build alliances with multiple fintech. We’ve got alliances with quite a number of fintech depending on their capabilities and the line of business.”

NIC Bank also became the first bank in East Africa to implement the NCR Interactive Teller. The service, branded as ‘NOW SERVE’, augments in-person teller services and allow customers to speak to a remote live teller and seek their assistance to complete over 90 per cent of all branch transactions.

“Today, customer experience is the primary differentiator in the banking sector and ‘NOW SERVE sets us apart as it allows customers enjoy a comparatively higher level of convenience, speed and reliability,”

In addition to NCR interactive teller, the banks has also rolled out some value addition to its asset finance portfolio. “What we have done is that rather than launch new products we have enhanced the experience.”

During the 2017 financial year, the bank recorded positive results despite the challenges in the banking sector. The banks also reported a pre-tax profit of KES 5.6 billion, compared to KES 6.2 billion the previous year. This was a 9.2 per cent decline year on year decline and this was attributed to the reduction in interest income on loans and advances. Its assets grew from KES 169.5 in 2016, to KES 206.2 billion as at end of 2017.

In the last three year strategic cycle, the Group invested heavily in growing their customer focused franchises namely Retail and SME banking and this saw its total assets increase by 42 per cent from KES 145.8 billion in 2014.

Total liabilities closed at KES 171.5 billion driven by strong growth in customer deposits which increased by 24 per cent during the period. Loan to deposit ratio reduced to 91 per cent down from 107 per cent a year earlier, while liquidity levels as at the end of December 2017 stood at 48.2 per cent.

“NIC last year, grew because the bank took a decision to continue lending not because the rate cap doesn’t affects but we felt that we had an obligation to our customers to support them during the period. We introduced more lines of products. We started leasing, we have expanded our scope and increased lending.”

NIC has a market share of about 4.6 per cent and by 2022 it hopes to have about over 5 per cent market share.

There has been talks of a review of the interest cap law with President Uhuru Kenyatta recently admitting that the law has seen access to loans and credit dry up. While the bill was intended to help the small traders’ access credit it has done the opposite as lenders deem them risky.

“For the economy the removal of rate cap is good. There has been proven relationship between credit growth and economic growth. There are more jobs for more people and the production levels will be high.”

In conclusion, Kibaara says NIC’s mission is to become a tier one bank. “It is not a secret we will be a tire one bank. This is because we have been growing faster than the market. It’s a question of when and not if.”

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