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The East African : June 2nd 2014
The EastAfrican OUTLOOK MAY 31 - JUNE 6, 2014 Q &A WI T H MIC HAE L MU T IGA Citi sees the big risk in the oil and gas sector as timely execution Citi Bank, a unit of the US financial conglomerate Citi, was last month ranked the best bank in Kenya by audit firm RSM Ashvir. Its managing director for corporate and investment banking spoke to The EastAfrican’s MWAURA KIMANI on Citi’s game plan in Kenya’s financial sector. You operate only two branches in Kenya, a model seen in your other markets like Uganda and Tanzania. Is there a plan to expand the branch network? Yes, we are planning to open more branches. The reality is that our clients are mainly concentrated in Mombasa and Nairobi, the primary commercial hubs in Kenya. Our platform is largely Internet or technology based. So, our customers outside these cit- ies can still make transactions. In the face of growing competition, where the smaller banks are intensifying the battle for large depositors and customers, are we likely to see a strategy shift by Citi Bank soon? Our strategy is to be at the top in our segment — corporate banking. We have developed a strong corporate platform and our plan is to drive increased share of our clients’ businesses. We would like to do more for our customers by helping them in their day-to-day banking and long-term strategies such as acquisitions and partnerships. In the past couple of years, we have handled big deals for Kenya Airways, L’Oreal and several infrastructure projects. Factors like bad weather and sus- tained terrorist attacks have cast a dark cloud over Kenya’s economy. What are the biggest worries for your customers? Terrorist attacks are un- fortunate, but they have not hurt investments so far. We have seen global companies that want to set up shop in Kenya. There is a significant number of people willing to invest in or buy into Kenyan companies, because they recognise that the local market is growing. The change of government has been relatively well managed. The shilling has been well managed by the Central Bank and there is a growing middle class market. The bank has been positioning itself to take advantage of the country’s nascent oil and gas industry. How is this segment doing? Oil and gas in this country is still a growing sector. We are at the exploration stage. But in the next few years, we will move to production. That will require financing, both debt and equity. Last year, we financed and raised equity for Africa Oil, which is exploring in Kenya. We expect more such financing as the sector matures and the region starts building oil and gas infrastructure. Investors have raised concerns about government policies in this sector, especially in terms of the rules and regulations governing it. What is the biggest risk in the sector? The biggest risk is execution: Doing projects within certain timelines and at the stipulated costs, and once you are producing, doing it within the expected levels. Going forward, the focus will be on whether we have the right environment to ensure that execution. What the government is trying to do is to establish a framework that benefits not just the foreign firms but the wider society. Kenyan banks, and by extension those in East Africa, have been posting improved profits over the years, defying an economic slowdown in the region. What is the outlook for this year, and what will drive growth? The demand for credit and bank- ing services will continue to increase, especially when the region moves to middle income status and more people are able to afford things like mortgages, financing holidays, school fees, cars, etc. Competition will be a lot more challenging because our customers will have more choices. They will shop around and go for the best deals. Due to the fact that we have a large banking community in the country, competition will always be a big driver in terms of managing our cost. We expect the corporate firms to continue growing in size, meaning their requirements will grow. There will be an opportunity to grow with them as they get bigger in terms of cash flows. There will also be more opportunities for large-scale infrastructure projects. There has been a push, especially by the central banks in the region, for commercial banks to lower lending rates. What is the outlook on lending rates? Banks are in a competitive mar- ket, and it is a market where there is a significant level of choice. The push to reduce interests will always be there. Competition is a strong driver towards ensuring that customers have options. 27 EA women banke≥s ≥ecognised By JOSHUA MASINDE Special Correspondent TWO EAST African women bankers received top accolades at the latest African Banker Awards for their role in promoting economic transformation through the banking sector. At the awards gala in Rwanda on May 21, Vivienne Yeda, director-general of the East African Development Bank, was named the African Banker of the Year. Mary Okelo, chairperson of the Kenya Women Finance Trust, received the Lifetime Achievement Award, while Bank of Botswana Governor Linah Mohohlo was named Central Bank Governor of the Year. Bank of Kigali emerged the best bank in East Africa while Guarantee Trust Bank was named the African Bank of the Year. This year, the judges also rec- ognised the smaller financial institutions as well as those that operate in challenging environments, especially in politically restive economies. Trust Merchant Bank, an independent commercial bank operating in the Democratic Republic of Congo — where financial services were disrupted by years of conflict that ended in 2003 —won the Best Bank in Central Africa award. Ecobank Mali, which operates in a country experiencing periodic political unrest, won the Best Bank in West Africa award. Stanbic Zimbabwe bagged the Best Bank in Southern Africa award. New investment vehicle The $325 million initial public offering (IPO) overseen by former Barclays Bank’s global chief executive office Bob Diamond through his new investment vehicle, Atlas Mara, won the Deal of the Year award. And the $3.3 billion finance BIO Michael Mutiga joined Citi in October 2006 as a director in the bank’s South Africa-based Corporate Finance Division. In August 2011, he was transferred to Kenya as head of the Corporate Bank. facility for Dangote Industries to build the continent’s largest refinery, a petrochemical and fertiliser plant, was also recognised, with Standard Chartered, the lead financier in the transaction, receiving the Deal of the Year award. Rwanda’s President Paul Kag- ame received the Special Recognition Award together with various finance ministers and chief executives of commercial banks operating in Africa. The awards, organised annu- We would like to do more for our customers by helping them in their day-to-day banking and long-term strategies such as acquisitions and partnerships.” Michael Mutiga ally by African Banker magazine and BusinessinAfrica Events, was sponsored by the African Development Bank (AfDB), the East African Development Bank (who were also regional hosts) and MasterCard. Omar Yedder, publisher of Af- rican Banker, said that women bankers have begun to lead the way in transforming economies in Africa through the financial institutions they head.
May 26th 2014
June 9th 2014