KCB Group has set up a special team reporting directly to chief executive Paul Russo to recover billions of shillings in bad loans. The lender is grappling with mounting concerns over its default rates which is among the highest in the banking sector. In the nine months ended September 2022, KCB’s gross non-performing loans grew 54.3 percent to 149.3 billion. Default rates were particularly worse at its subsidiary National Bank of Kenya (NBK) at 24.5 percent, and KCB Bank Kenya at 19.8 per cent.
Mr Russo says he has initiated restructuring of the business to accelerate recoveries and improve the group’s asset quality. “Relationship teams are designed to grow business, they are not necessarily competent in matters regarding recoveries, restructuring and nursing struggling borrowers,” Mr Russo said. “Also, they are conflicted because they were involved in building the relations and are, therefore, not able to make tough calls on recoveries. So, I have separated these two teams and created a special assets team reporting directly to me.”
The team is mandated to chase recoveries to the tune of Sh120 billion across the group constituting legacy debt from NBK, government agencies whose loan facilities have been downgraded and corporate entities who have been placed under receivership.
Mr Russo says KCB has also decoupled the roles of Group CEO and Managing Director Kenya in a bid to infuse more impetus into the Kenya business. In the first half of 2022, subsidiaries outside Kenya accounted for 27 percent of KCB Group’s Sh1.21 trillion asset base, up from 24 percent in the similar period in 2021.
“I am passionate about separating the role of the group and subsidiaries. So, I split the Group CEO and managing director Kenya role because you have got to hold KCB Kenya, which is a critical entity, to account like any other business,” Mr Russo said.
NBK, which is also on the radar for accelerated recoveries, has a new MD, George Odhiambo, who was tapped from the group’s Rwandan operation. The board of KCB is expected to take a decision to further recapitalise NBK in the March 2023 meeting.