Joshua Oigara’s stellar tenure headlines changing of the guard at KCB Group

By JAINDI KISERO

Joshua Oigara, longtime chief executive of East Africa’s largest bank, KCB, left the C-suite this week, leaving a legacy of transformation, change and innovation.

In 10 years, he transformed the nature and character of the bank from a lender primarily serving large ministries, departments and public sector clients into an innovative and truly consumer-oriented retail bank while maintaining a strong presence in the corporate, institutional and government banking sector. clients.

The true test of a CEO’s and business leader’s performance is the results they produce throughout their tenure. Evaluation parameters must be based on objective data and not on public opinion. And in financial intermediation metrics, Oigara got off to a flying start when he took over the bank in January 2013.

The lender has achieved dramatic growth in customer deposit accounts. During his tenure, customer deposits would grow at a compound annual growth rate (CAGR) of 35%.

Data extracted from regulatory financial disclosures and Central Bank of Kenya banking supervision reports shows that net growth in loans and advances during Oigara’s tenure grew at a CAGR of 14.5% easily topping the figures banking sector – at a much lower CAGR of 8.3% over the same period.

KCB’s share of industry loans and advances has grown from 15.2% in 2013 to a remarkable 22.7% in 2020. In other words, based on analysis of regulatory financial disclosure statistics and reports from Central Bank supervision reports, KCB advances nearly one out of every seven shillings in Kenya’s banking sector today.

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Profits before taxes

The advent of Kenya’s rate cap law in September 2016, just three years after Oigara took over the reins of the region’s largest bank, presented him with major strategic challenges. Yet an in-depth analysis of data extracted from regulatory financial disclosures and CBK reports will show that, unlike his larger peers in the region, Mr. Oigara has managed to maintain the trajectory of high customer deposits and loan growth. .

The bank navigated through the adverse conditions to shrewdly grab market share from its peers, with customer numbers and deposit growth driven primarily by digital offerings, where mobile lending quadrupled in 2019.

According to the data, mobile loans and advances grew rapidly from 2015 at a CAGR of 121.6% to account for 25.9% in value of the bank’s net loans and advances portfolio by 2021.

At Ksh 154 billion ($1.3 billion), KCB’s mobile loans and advances eclipse – in value – the loan portfolio of Kenya’s digital lenders combined. Today, the sheer size of KCB’s digital lending portfolio effectively positions the bank as a prominent fintech.

Judging by Oigara’s tenure looking at P&L performance and balance sheet metrics, the picture that emerges is one of solid success.

New sources of income

The bank’s pre-tax profits reached the highest level in the bank’s history at $470 million, reaching a spectacular compound annual growth rate of 11.4% even after taking into account the decline in revenues and earnings growth in 2020 that was occasioned by the coronavirus pandemic.

Data analysis will reveal that the high and stable level of pre-tax profit margins was the consequence of the cost containment measures implemented by the Oigara regime, which consistently lowered the cost-income ratio by 51.7% in 2013 to 44% in 2021. .

As a result, KCB’s share of banking sector pre-tax profits increased from 15.2% in 2013 to 22.7% in 2020, a remarkable achievement for the company.

Another picture that emerges from examining the data spanning Mr. Oigara’s 10-year reign at the bank is of the cautious deployment of capital to fund investments in new revenue streams.

Unlike some of its larger peer group banks, Oigara’s mandate has maintained conservative dividend policies with dividends per share averaging around 40% of earnings per share.

In contrast, peers over the same period shifted profits through 100% dividend payouts, eroding equity and denying the financing needed to take advantage of opportunities in domestic and regional markets.

Prudent deployment of capital has led to a sustained increase in KCB’s capital and reserves. This is how Oigara was able to complete high-profile M&As in the domestic market, where it acquired the National Bank of Kenya, and others in regional markets in Rwanda and Tanzania.

Oigara left a legacy of exemplary personal achievement on most metrics. When I look at the numbers, what happened at KCB amounts to corporate chemistry.

Over Oigara’s 10 years at KCB, we have learned poignant lessons about the impact of long CEO tenures and the effect of CEO turnover on performance.

Longer terms come with experience and institutional memory. There are also lessons to be learned from CEO succession management and planning, particularly in the context of a star CEO transition.

The board’s choice of Mr. Paul Russo – a longtime insider to lead East Africa’s biggest bank – is a vote for continuity.

About Ernest Decker

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