BK Group Plc, the parent company of Bank of Kigali, has announced an increase in profit in the first quarter of 2023, reporting a 14.5 percent increase compared to the same period last.
Rwanda’s leading bank reported a profit of Rwf17.88 billion ($16 million), driven by returns on non-funded income, increased interest and improved performance of the group’s subsidiaries.
Announcing Q1 results on Tuesday, BK Group CEO, Beata Habyarimana, attributed the bank’s improved performance to a decline in inflationary pressures across the country, with inflation going down from 19 percent in the last quarter of 2023 to 17 percent in Q1 of 2023.
Habyarimana also attributed the performance partly to the decline in prices of goods in recent months, pointing out that the positive trajectory is expected to continue, with a predicted improved performance of the agricultural sector for the second half of the year.
She pointed out that expected economic growth will remain sustainable regardless of a trade deficit the country has to deal with, despite the country’s exports increasing by 17 percent.
Regardless of that, Habyarimana said BK stands strong as a financial institution in terms of foreign exchange revenues where we have a big portion of the market.
“Today we are happy to report that the financial results of Quarter 1 2023, have recorded a net income or Rwf17.9 billion ($16.2m), with a strong return on assets and on equity ratios,” Habyarimana said.
Dr. Diane Karusisi, Bank of Kigali CEO, said that the good performance in the first quarter of the year was driven by an increase of nearly 9 percent of BK’s net interest income.
“The major highlight of this past quarter was the improvement in our non-funded ratio and non-funded income that has increased by almost 80 percent year-on-year. We also had gross premium income increasing by 12.6 percent,”
“This is the top line growth that has driven the performance of this quarter. We are happy to post very healthy ratios in terms of net interest margin at 9.5 percent, non-funded ratio at 29 percent, and the cost to income ratio that is around 40 percent, which is our target,” Dr. Karusisi said.
She pointed out that BK’s return on equity as a group was at 22.2 percent and a return on assets at 4 percent.
BK Group’s profit after tax increased by 14.5 percent year-on-year, to Rwf17.9 billion, stemming mainly from non-funded income that has grown by 79.7% year-on-year, contributing to the said profit.
According to Anita D. Umuhire, BK Group Plc Chief Finance Officer, the bank’s fixed income stood at Rwf4.8 billion, reflecting an increase of 61 percent year-on- year, attributed mainly to a better net open position that saw the bank ink several good deals in the reported period.
Bank of Kigali’s fees and commissions also increased by 108 percent, mainly through loan related fees, merchant commissions and other service charges.
BK Group’s BK General Insurance also posted a 12.6 percent increase in gross premiums, mainly attributed to an increase in uptake of motor insurance services.
The group also announced an increase in BK Capital operating income, currently at Rwf236 million, indicating an increase of 65 percent year-on-year, mainly coming from advisory services as well as fund and asset management which increased by 30 percent.
The group’s other subsidiary, BK TechHouse, reported a 54 percent increase in sales, making about Rwf389 million in earnings mainly from sale of broadband products as well as digital platforms that performed well in the first quarter.
Umuhire said that the 8.6 percent year-on-year increase in net income was mainly due to better pricing of new loans as well as the well-managed cost of funds that was maintained at 3.8 percent.
However, the group’s operating expenses are up by 24 percent, currently at Rwf21.1 billion, indicating a year-on-year increase of 24 percent, mainly due to card-related fees and maintenance costs, as a result of improved performance in card-related transactions.
The financial institution also registered an increase of 20 percent in staff-related expenses mainly due to fresh recruitments as well as inflationary adjustments.
Bank of Kigali’s net provisions increased by Rwf4 billion due to staging migration of some key accounts that were on the bank’s radar, resulting in a cost of risk of 2.6 percent.
The bank’s balance sheet shrunk by 6.1 percent year-on-year compared to the last quarter of 2022, attributed to short-term borrowings and inter-bank balances that matured at the beginning of 2023.
BK also reported a decline in customer deposits, which have reduced by Rw16 billion mainly due to price-related challenges.
The bank also said that a decrease in its funding base adversely affected its investment strategy, a Rwf50 billion investment in government securities matured but was renewed.
Similarly, BK’s loan book slightly decreased by one percent 1.4 percent mainly due to major repayments that were registered at the beginning of the year.
The bank is now focusing on growing the funding base to ensure organic loan book growth, buoyed by the performance in the first quarter.
Uptake of online banking
Dr. Karusisi pointed out that the bank continues to see more people migrate from banking with branches to online banking and the mobile application, which is in line with Bank of Kigali’s strategy to see more people using digital channels.
As a result, Karusisi said that the bank recently closed one of its branches as people continue to show appetite for digital banking options, something she said will help cut the institution’s operating costs.
She attributed the adaptation of digital banking services to revamping of digital channels, introducing new features and payment solutions, among them a loan management feature, all of which have improved customer experience.
“We added a number of payment solutions, people can now send money to China using Alipay from the app. This is something that we’ll continue doing improving experience but also adding more features to our channels,”