• loss as a result of high start up expenses

Kenya Commercial Bank (KCB) Rwanda, has registered a net loss of Rwf381.4 million in the first semester of 2009 on account of high startup expenses, the bank’s second quarter financial statements have shown.

KCB said operating expenses were Rwf740.4 million, mainly driven by high costs on development of physical infrastructure, human resource and technology to penetrate into Rwanda’s banking industry.

"This normally happens in the first year of operation which is basically a year of investment. Unfortunately, this happens even before you start getting customers. This means we have a period of time when we are spending money before generating any revenue,” Maurice Toroitich, KCB Rwanda’s Managing Director said Tuesday in an  interview.

KCB Rwanda, a subsidiary of Kenya’s KCB Group, which also has presence Tanzania, Uganda and Southern Sudan started operations in Rwanda late last year.

Toroitich explained that the bank’s first year of operation was about investment in terms of fixed assets, staffing, training and paying costs related to starting a new business.

The bank has not yet issued any long-term credit but on short term basis, a combined loan size of Rwf291.2 million has been disbursed in form of overdrafts and consumer loans.

However, Toroitich is optimistic that KCB will breakeven in the next year as it will be fully established and operational.
"As we get into another year we shall begin normal trading with a whole range of our banking services,” he explained.

The external shocks of the global economic downturn have slowed KCB’s pace of growth.

According to Toroitich, while the bank has not been directly affected by the crisis, the slowdown of the Rwanda’s economy as a result of the global economic downturn has had a big impact towards their growth.

Toroitich also mentioned that though the bank had anticipated a loss at the beginning, the level of growth in terms of customer deposits was slower than expected as general interest rates remained, something that affected interest income.

The bank’s net interest income in the period was Rwf203.3 as interest expenses were recorded at Rwf1.5 million.   

However, Toroitich said that the economy signals recovery since the liquidity crunch in the local banking industry has started to loosen.

He attributed this to efforts by the commercial banks to bridge the gap between short-term deposits and long-term lending.

Recently the Central Bank also injected funds into the banking system to avail long-term liquidity to commercial banks.

KCB has opened new branches in Huye, Rubavu and Rusizi, in a bid to increase its presence and reach out to its target market.  

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