Rwanda’s largest bank just got a new MD; she will fire up the lender which is losing steam

In a bid to remain at the top echelon of banking in Rwanda, the country’s largest lender by assets, Bank of Kigali has announced Diane Karusisi as its new managing director following the resignation of James Gatera, who headed the institution for nine years. Diane is a sister to Ruki, who is believed to be one of President Paul Kagame’s trusted bodyguards.

Diane has been named by critics of President Kagame as one of his “criminal ring”. Her appointment is therefore seen as the president’s way of having a hold on the big bank, especially with Gatera’s resignation seen as part of a ‘needless’ larger restructuring of a bank that has been doing very well over the last half-decade. International businessman Marc Holtzman, who is part of Kagame’s circle, was last October appointed as Chairman of the bank’s board of directors. Holtzman and others are alleged to be a network deeply embedded in Rwanda’s financial sector and directly-linked to the president.

But more than the conspiracy theories and allegations, Bank of Kigali’s third quarter and nine month result for 2015 showed the bank may be losing steam. While its third quarter total operating income was  up by 4.3 percent to $22.9 million, its total recurring operating cost rose by  9.3 percent to $10.9 million. This proved that the bank could not rein in cost in the third quarter which grew by a higher percentage than the income. Even more, its third quarter net income actually fell by 3.4 percent to $7.4 million.

However, the bank’s nine month result appeared better. Its net income grew by 13.7 percent to $22.4 million. The total recurring operating costs grew marginally by 2.8 percent to $30.2 million, proving that the operating cost actually ballooned in the third quarter.The bank’s total asset fell by 2.7 percent to $735.9, while its client balance and deposits also fell by 6.7 percent to $502.2 percent.

Bank of Kigali will be banking on Diane Karusisi’s experience to ensure it holds its place in Rwanda’s competitive banking industry.  Karusisi holds a PhD in Statistics from University of Fribourg, Switzerland. She has worked as a fixed earnings profile engineer at Credit Suisse, Zurich. She has also worked as a senior advisor to the supervisor-general of the National Institute of Statistics of Rwanda and as deputy chairperson of the board of governors for University of Rwanda. Since the Rwandan economy became more liberalised, several foreign financial institutions have entered its banking sector making it very competitive. Some of these foreign institutions have been from fellow African countries such as Kenya, Uganda and Nigeria.  For instance Access Bank and Guaranty Trust Bank, two prominent Nigerian banks bought over banks in Rwandan renaming them to reflect their respective mother names.

Despite the vibrancy in the sector, there are still some critical issues that remain unresolved. One area of concern in the industry is the concentrated lending habits of banks. According to the latest Annual financial stability report authored by the Rwandan Central Bank,  64 percent of banking system loans in Rwandan went to  two sectors Mortgage, and ‘trade and hotel’. The report said: “The share of mortgage loans in total loans was 33 percent in June 2015, up from 29.6 percent in June 2014. This shows that banks accelerated their lending to mortgage sector. In second place, trade and hotels loans was 31 percent of total loans in June 2015. Together, mortgage and “trade and hotels” held up to 64 percent of banking system loans in Rwanda,”

This high exposure to the two sectors could create instability in the banking system if any of the sector were to suffer a shock. These are some of the issues that the shareholders of Bank of Kigali would hope their new MD would be able to resolve.

James Gatera’s resignation will take effect when the central bank approves the appointment of Diane Karusisi as new MD.