Rwanda’s leading commercial bank, Bank of Kigali (BK) plans to close eight branches across the country as it seeks to reduce operational costs, which are affecting its profitability.
While the Rwanda Stock Exchange-listed lender remains profitable, latest published results show its earnings are under threat from high operating costs.
According to the third quarter to September 2018 results, the bank’s recurring operation costs increased by 28.4 per cent year-on-year, reaching Rwf13.3 billion ($15.2 million) from Rwf10.3 billion ($12.3 million) in the same period last year.
Analysts say part of these costs are driven by a large headcount made up of 1,240 employees and a 79-branch network during the period under review.
Bank of Kigali’s head of marketing Thierry Nshuti said a concentration of branches and low business in some areas informed the decision to shut down the branches especially in Kigali.
“Among the closed branches are the Kigali Institute of Technology Branch, which will see students served better by an automated teller machine.
The Kigali City Tower branch will also be closed while the one at Mulindi relocated to the Dubai World Port at Masaka,” said Mr Nshuti.
The lender is also set to close down the main branch in Musanze, while those in Gisenyi border and Rusizi town also face closure.
Analysts say BK’s large branch network has been unsustainable. Over the past three years, big lenders have been reducing their physical presence as they focus on expanding their mobile-based and online banking services.
In 2017, Pan African lender Ecobank closed five branches in Rubavu, Muhanga, Musanze, Nyagatare and Rwamagana as it sought to consolidate its digital strategy. I & M Bank had said it planned to open new branches upcountry during its initial public offering, but has yet to implement this plan.
Data from the National Bank of Rwanda shows the number of bank branches has reduced from 553 in June 2017 to 522 in June 2018.
“This reduction is attributed to the adoption of digital channels and agency banking. The number of lenders using agency banking increased from five as at June 2017 to six as at June 2018,” according to the central bank.