NCBA Bank MD on COVID-19 & the group’s performance one year after merger

NCBA Bank, the result of a merger between NIC Bank and Commercial Bank of Africa, has faced economic challenges stemming from the COVID-19 pandemic. The bank's Group Managing Director, John Gachora, recently sat down with CNBC Africa to discuss the bank's performance one year after the merger. In the first half of 2020, the bank reported a 39.5% drop in net profit due to economic shocks caused by the pandemic. Gachora acknowledged that the bank had to account for impairments during that period, which significantly impacted the net results. However, despite the drop in profits, the top line of the bank's performance was strong, with operating income increasing by 91% year over year and operating profit before provision up by over 115%, thanks to the merger. Gachora emphasized that while there were challenges, the merger had allowed the bank to drive market share, invest in new technologies, and acquire capabilities from the two banks to offer improved services to customers. Reflecting on the first year since the merger, Gachora highlighted significant achievements in market share growth and the expansion of capabilities in areas such as asset finance, wealth banking, and corporate banking. The bank's focus on growth had initially included plans to open 15 new branches in Kenya alone, but due to the impact of COVID-19, only two branches have been opened so far while 13 have been closed. Gachora remains optimistic about the bank's expansion plans post-COVID-19. Regarding the bank's shareholder relations, Gachora reassured that NCBA Group is well-capitalized and remains profitable, eliminating the immediate need for recapitalization. He mentioned that the bank had offered share bonus shares earlier in the year instead of cash dividends, and highlighted the liquidity and capital strength of the group. Gachora expressed confidence that the bank would not need to seek additional capital from shareholders in the near future. Addressing the performance of the bank's loan book, Gachora acknowledged the high NPL ratio in Q1 2020, especially in manufacturing and trade sectors. With the reopening of industries, he anticipated a slow recovery period for businesses, particularly those in tourism, hospitality, and transportation. While some businesses may never fully recover, Gachora noted that NCBA Bank was relatively less exposed in those industries and expected a boost in local manufacturing and production post-recovery. In response to dividend payment queries, Gachora explained the regulatory requirements by the central bank regarding capital adequacy discussions before dividend disbursements. He stressed the importance of maintaining sufficient capital for strategic investments and meeting customer needs. Gachora assured shareholders that once the central bank is satisfied with the bank's capital adequacy projections, dividend payments would likely resume. Despite the economic challenges posed by the pandemic, NCBA Bank has continued its expansion efforts, including the opening of new branches in Zanzibar and Kenya. Gachora reaffirmed the bank's growth-focused strategy and confidence in the value proposition for customers. This bullish approach to expansion reflects the bank's commitment to providing quality services and thanking customers for their continued support. While the full Q2 results are yet to be disclosed, Gachora emphasized the bank's strong top-line performance as a testament to the support from its customers.