Barclays bank financial results

Most banks in Kenya, both local and international announce their financial results for the previous year between February and 31^st March.

Barclays bank of Kenya was the first bank to announce the financial results for 2011. The bank had a steep drop in net profit. The reported net profit was kes 8 billion after tax down from kes 10.5 billion in 2010. The 23.8% fall in net profit fell short of market expectations.

The bank has defied these results and will give a higher return or dividends to its shareholders. The final divided to be given out will be kes 1.5 per share which includes 0.06 per share as special dividend. This payout is 10% higher than last year’s payout of kes 1.35 per share

Barclays Bank results explained in detail

The reason given by Barclays Bank for this reduced profit is due to marginal total income growth. This kind of growth translates to a kes 1.49 per share performance. This compares adversely to the performance in 2010 of 1.95 per share. Barclays did not expect this result which is way below the forecasted outcome.

In 2010, Barclays Bank had made 3.5 billion from sales of its custody business. In 2011, these sales were not forth coming.

Inflation in Kenya rose from 5% to more than triple and ended the year at more than 15%. Interest rates also more than double between 2010 and 2011. The loan book for Barclays consequently grew to 99 billion. This growth in loan book was not reflected in the interest income which only grew to kes 13.6 billion. This is a modest growth taking into account the large loan book.

Barclays Bank mitigation strategy

• Though the non interest fell by about kes 300 million to 10 billion, the prudent cost management measures employed by Barclays Bank saw the ratio drop from 54% to 52% the previous year.
• A retrenchment program involving middle level managers helped to save the day by making huge cost savings to the tune of kes 1 billion
• The roll out of ATMs has helped Barclays Bank Kenya in its ongoing cost saving plan. Together with ATMs Barclays Bank Kenya has also rolled out internet and mobile banking.
• Barclays Bank Kenya managed to cut the costs on funds in high inflation market like Kenya was phenomenon.
• Barclays Bank Kenya has been leading to stable corporate and will continue to do so in the coming years to escape the high default rate risk, as inflation continuous to bit and is unpredictable.
• Nonperforming loans also dropped by over 1billion due to aggressive debt recovery strategies.

Barclays Bank  may have set the tune for the results to be released by other banks, and it may be an indication that banks in Kenya will not make supper profits as has been the case in previous years.

However this doesn’t mean they should simply just put up a quick banking website just to be present online. Banking websites must have appealing web designs with essential elements that capture and retain their users’ attention.

In this article I will discuss three important things web designers in Kenya should consider when developing a banking website.

1. Who Is the Banking Website Targeting as Their Customers?

It is important to understand who the target audience of the banking website is. Who they are, why they will be visiting the website and what they intend to do on the website. A majority of the consumers will visit the banking website with a specific objective.

While some will visit the banking website to find out information on a banking product others will visit to access online banking. Therefore you need to understand that every user will definitely want their area of interest to be given priority.

This can be achieved by grouping information on a banking website targeting a specific group separate from information targeting another group.

As seen in the example above taken from the Commercial Bank of Africa website, they have separated information in 3 sections: Personal Banking, Corporate Banking and Investment Banking to target the 3 types of customers who may visit their website.

2. Visual Appeal and Brand Consistency Of The Banking Website

The look and feel of a banking website is very important to the users. It needs to appeal to them and achieve a balanced look and feel of the bank’s corporate identity.

This can be achieved by having a consistent design layout, good contrast for easy readability and use of visual imagery used in other media e.g. magazines, Television, Billboard so as to give the site an instant and familiar appeal with customers.

As seen on the above example taken from NIC Bank website, the bank has worked hard to achieve visual and brand consistency by using their corporate color (blue) and using video that they have been using on their T.V commercials. This immediately gives visitors to their site an instant appeal of familiarity when they land on the site.

3. Online Banking Should Be Easy To Find and Feel Secure on a Banking Website

Some of the users visiting the banking website will do so just to access their online banking. Therefore it is important to make this as simple as possible for the users. This can be done by making the option visible and easy to find throughout the website.

As seen on the above example taken from Diamond Trust Bank, they have made it very easy for people interested in online banking by placing the Login to DTB Online Banking on the sidebar of every page making it visible and easy to find when a user is on any page.

A Banking website must also remind the online banking users of how secure the site is. This is very important especially for the less-regular web users. They should also ensure that new users find information about the service and how they can register.

As seen on the above example taken from Diamond Trust Bank, they have achieved this by having a Learn more button at the top so that new customers can find information about the online banking service. They also make a great effort of assuring and advising users of their security before login to their online bank account.

Of course there are many other factors to consider when designing a banking website but the three highlighted on this post should never be ignored by banks in Kenya to ensure they have a solid online presence.

Justification of Corporate social responsibility by banks

The banks through Corportate social responsibility are giving back to the community to improve the communities in which they operate. Corporate social responsibility is mandated in many countries for corporates.Banks have discovered that it is equally important for business growth apart from providing excellent customer service and even coming up with very innovative products. It has therefore usual to see in the media banks highlighting their Corporate Social Responsibilities undertaken during specific periods.

Options taken by banks as Corporate Social Responsibility

• Education Foundations for the less privileged yet bright students
• Provision of much needed water, either by funding drilling of boreholes in arid and semi arid areas or where communities have no access to clean water
•  building of classrooms or schools facilities like libraries
•  hold marathons to support eyesight and/or heart operations for the people who are unable to afford the same.

Benefits of Corporate Social Responsibility to the Bank

Even though Corporate Social Responsibility is seen as of great benefit to the communities the banks also benefit from it. Some of the benefits are listed below

• Loyalty by the existing customers due to corporate social responsibility. The existing customers are proud to be associated with the bank that is having a positive impact on the community and are likely to continue banking with them
• Corporate Social Responsibility helps a bank to attract new customers. This is especially true for members of the community targeted by the bank. The new accounts opened lead to business growth and new opportunities.
• Corporate Social Responsibilities boosts the morale of the existing employees as they are proud to be associated with such a bank. This pride in the employer increases employee productivity and reduces staff turnover resulting in reduced costs associated with hiring and training of new staff.
• Corporate Social Responsibilities also singles out the bank as an employer of choice as most potential employees look to them as their ideal employer therefore they are easily able to acquire the best skills in the market.
• Corporate Social Responsibility activities act as advertisement opportunities for the banks’ products. The products sold to the community are seen more than just bank products but as products that result to  Corporate Social Responsibility
• Corporate Social Responsibilities helps in brand reinforcement among the populace. People generally easily associate such a bank and learnt to trust the bank viewing it as the one that cares for the welfare of the community.

Budgets must include the amounts that would be ploughed back to the community banks. Corporate Social Responsibility activities are important and cannot be ignored.

 Definition of Cross selling by Banks

cross selling by Banks

Cross selling by banks is defined as offering the existing customers additional banking products. For example, a deposit customer who is already operating a savings account can be offered a term deposit account or a fixed deposit account or call deposit account. Another customer can be offered  mortgage finance, credit card and personal loan.

cross selling by banks can also be said to be the art of customer retention by ensuring customers are provided with as many products to meet their needs.

Process for effective cross selling by banks exercise,

• Analysis using existing customers database should be done for each customer, identify their specific need and match with a product that can be offered to the customer as a cross selling product.
• After identifying the product,  the banks should come up with a strategy on how to disseminate information about the product to the customer. The strategy may suggest each customer be assigned a particular staff for smooth management of the relationship.
• The staff members charged with this responsibility should be knowledgeable and well trained in cross selling to be able to market all or majority of the banks products to the customer.
• There should be continuous periodic review of the customer needs and the database to identify the needs of new customers.

This exercise has proved to be very beneficial with more banks adopting the approach, major banks have expanded their banking business.

 Benefits of Cross selling by Banks:

1. There is increased profit as the bank is able to greatly expand their banking business by offering more products to existing customers. There is tremendous growth in business.
2. There is reduced cost as it has been proven that the cost of acquiring a new customer is four times higher than serving the existing customer, with reduced cost the profits will also increase.
3. There is ensured loyalty of the customer to the banks and therefore there is little or no likelihood that the customer would shift their business dealings to another bank. This is also known as ‘ring fencing’.
4. The bank would have a competitive edge over the other banks, because in the process of analyzing the needs of the existing customer they would come up with innovative products which are not being offered in he market.
5. Cross selling by banks can also greatly build team spirit among the staff members of the bank, creating loyalty and reducing staff turnover as they are well trained and feel part of the team that brings in the business and not just ‘robots’.

Cross selling by banks is an art if well mastered by the bank will have a great long term effect on the business growth and put the banks on the cutting edge of innovation. Training in cross selling by banks is a must to grow and compete in the industry.