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.

Having identified the importance of Corporate Banking, majority of banks create specific departments to ensure that their needs are met. Given the magnitude of their transactions and their importance these companies need a designated Relationship Manager.

Corporate Banking

The relationship manager provides advisory services on for example, investments and Capital decisions. The relationship manager also tries to identify change in the corporate customers’ need the relationship manager comes up with innovative solutions to meet this corporate banking need.

Managing this Relationship is slightly different from managing an SME as the failure or success of a corporate has a great impact on the Bank. So whether these Corporate Companies have credit facilities or not, the Relationship Manager should always be in touch with the following areas of the company

Corporate banking- Governance of the Company

This includes the members of the Board of Directors, the Board of Management and the management structures in place. The shareholding structure of the company and the bank also investigate the integrity of the team and what impact the corporate would have on the reputation of the company. The quality of governance is very critical as it can help determine the future of the company.

Corporate banking -Recovery Management

This is key to the stability of the business and it is important to establish in general if the corporate has a policy on the recovery from any unforeseen factors that would greatly affect the business. In other words the disaster recovery plan or the business continuity plan is very important and must be disclosed to the bank.

Corporate banking-Technology

This affects database management, establishing whether a company is up to date in technology, which is changing rapidly. Updated technology greatly ensures good database management, resulting and leading to accurate reporting, increasing transparency and accountability. Technology may also be used to reflect the financial health of a corporate.

Corporate Banking-Risk Management

Establish whether the corporate has identified the risks that could greatly affect their business. Confirm the measures that have been put in place to manage the risk. These measures must be well documented. The corporate should have unit monitoring for the ever increasing risks.

Corporate Banking -Management of Manpower

Establish whether the corporate optimizes manpower resources in terms of numbers, knowledge and even skill. This in turn maximizes productivity, improves quality of operations.

Given the current economic crises that has greatly affected many corporate companies, it would be prudent for the banking industry to keep in touch with their corporate customers operation  by providing relevant corporate banking solutions.

Reasons for a loan without a bank account

loan without a bank account

The argument was that the bank account enabled the bank to determine the ability of the potential borrower to service the loan. The bank account would be used to compare the credit turnovers against the debit turnovers.

Most banks  have realized that this concept does not really make sense to a certain category of potential borrowers; the people in formal employment. Majority of these people in formal employment have only one source of income, that is, the salary income. A salary is reliably paid at the end of every month.

 Loan without a bank account through check off system

In order to have a competitive edge, most banks have reviewed the requirement to operate an account for a minimum of six months before being considered for a loan. They have therefore instituted what is called ‘check off system’ with the employers.

Loan without a bank account through check off system is an agreement between the banks and the employers of the potential borrowers. Deductions for loan repayment are deducted at source through the payroll.

When lending to this category of potential borrowers, the banks appraisal is on the employer and not the borrower.  Banks analyze the employer to know:  how long they have been in business, who the directors of that company are and even staff turnover within the company.

This has made governments to be seen as trusted employers of potential borrowers. Banks have been targeting many Government institutions like Teachers Service Commission (TSC), civil servants, Armed forces, international organizations and even the police forces.

The banks, on agreement with the employer to give a loan without a bank account, will sign a Memorandum of Understanding which will clearly indicate the following:

• The agreed date the deductions for the loan repayment will be done from the payroll and when the same will be submitted or remitted to the bank.
• The preferential interest rate the employees will be charged by the bank.
• The maximum repayment period for the loan granted to the employee by the bank.

 The only requirements for loan without a bank account these potential borrowers need are:

1. Pay slip for at least three months as proof of the amount of net salary they receive on a monthly basis.
2. Letter of appointment from the employer which indicate the terms of employment for example if they have been employed in permanent or temporary basis, retirement age.
3. To be able adhere with the two thirds rule, employers approval must be obtained and confirm that there are no other loan commitments. The two thirds rule means that the borrower must retain two thirds of their salary to live on.

Inspite of the above the responsibility and risks of lending to the potential borrower does not pass to the employer, the bank must still practice prudent lending. Giving a loan without a bank account is a decision that banks all over the world are using to make higer profits.

After rushing into the banking hall in the nick of time, the customer service agent in the bank looked at the time on her computer and it was pretty obvious she thought i was late. This made me want to apologize for such a mad dash into her territory. I though she should have been happy for a customer since there was no other customer in the banking hall.

customer service in the bank

I was the one who talked to her first, since she had not acknowledged me by saying hello or good afternoon. After I told her what had brought me to the bank and the types of bank accounts I wanted to acquire from her, she told me that I could fill out forms but I would only get my products and accounts on Monday since they had run out. This was alright, but I would expect that she would try to sell me another product after finding out why I was interested in the product I was looking for. She could also have sent me to the banks’ other branches for the same product.

The customer service in the bank was lacking since I left the bank with only what I asked for, nothing was offered voluntarily. The bank officer did not apologise for not having the products.

Below are 4 basic “musts” for customer service in the bank to attract and retain customers.

Customer service in the bank –smile

The receptionist or front desk officer should smile and welcome all who come into the branch with an appropriate greeting. The greeting and smile should not be for those who look like they have money but for all who come into her domain. a smile is very simple and easy to give, but it is very important to customers.

Customer service in the bank –  listen attentively

The service agent or bank officer should listen to my request or needs to determine what best suits me. The service agent can persuade a potential customer to get more than one product whne they have the product in place. The potential customer may be after information and advice and when this is given before even opening an account, then the customer feels more satisfaction. They do not have to come later to the bank to sign up for another product when they could have finished at ones

Customer service in the bank – available products

The bank should have a well organised stock control and replenishing system so that they do not run out stationery, cards and currency denominations. It is very frustrating to get to the teller who advices you they can only pay in denominations you did not want. Have enough of all currency or advice customer to give you a few minutes as you get the denominations. Sometimes the stationery , like deposit slips run out and one is forced to move from place to place looking for the forms. They are informed the forms are not currently available after wasting time in the banking hall.

Customer service in the bank – Man the service desk

The service officer desks are in many banks out in the banking hall. It is very vexing when the service officer is never seated at their desk or has to keep moving to the back office. Sometimes the service officer also answers queires on their desk so they are not able to attend to customers who are face to face with her. The banks should have the phones received by others so that the customers in the banking hall may be served.

Many of us have many bad things we can say about our banks’ customer service.we should also acknowledge when the banks go out of their way to ensure we are well served and taken care off. Many banks have customer service as a deliverable for their staff and the banks must ensure customer service in the bank is felt by the customers.

Bank Loan

The availability of loans to the public in recent times is a relief to the government and the public at large. There are numerous loans that the banking industry in Kenya gives to their customers. The loans are also designed to target those who are not yet customers of the bank too. The banks are introducing bank loan products almost on a monthly basis, for example, laptop bank loans to students.

Bank Loan Types

1. Mortgage or Home Bank Loan

These loans are given for the purchase of homes or to build homes. With the housing shortage in Kenya, these loans are very welcome. The banks’ target the high and medium income families and the low income families are left out. The government has introduced the low income housing projects to bridge this gap.

The loans may be sponsored 100% by the banks. Some banks prefer that the applicant finance a stated percentage of the amount borrowed. Different banks have different rates that they offer to the applicants.

2. Business Bank Loan

For both small and large businesses the banks are relevant because businesses required loans. The loans may be start-up loans or loans to help with cash flows. Some businesses have overdraft facilities with banks to ensure that their business do not fail to meet their financial obligations at any time. The Jua Kali industry in Kenya, which has employed a large percentage of the population in Kenya, is now able to access loans through the small and micro economic packages that are availed locally. The packages may be locally or internationally initiated.

3. Car Bank Loan or vehicle asset financing.

The applicant is assisted to purchase a personal vehicle or a fleet of vehicles for business purposes. The percentage of financing is dependent on the individual banks. Some banks finance 100% while others require the applicant to raise a percentage of the loan amount. The transport industry has relied on these loans to run their businesses. The aviation industry together with the rail transport who require heavy capital outlay also rely on these category of loans.

4. Home improvement Bank Loan

These types of loans may range from additional construction for already existing buildings to furnishing the homes. Many customers are not aware that they can get these kinds of loans from the banks and they often approach their Savings and Credit Co-operative society (SACCO) account. The customers get loans to buy furniture or electronic equipment for their homes.

5. Personal Bank Loan

The personal loans may be secured or unsecured loans. These range from salary advance loans or emergency loans. The banks may require that the applicant’s salary be received in the bank advancing the loan.

6. Investment Bank loan

Investment loans include, but are not limited to borrowing funds to invest in shares. Banking in Kenya was treated to frenzied action a few years ago when initial public offers for various companies were floated. The banks started to advertise and give loans to customers to avail funds to purchase the floated shares. The Shares are used as collateral.

7. Educational Bank Loan

Banks avail loans to assist students or parents to pay for education. The loans are not a preserve of the SACCO but are also available in the banks. Apart from the school fee schemes by the banks, the banks are becoming more innovative and are partnering with education institutions to avail the loans.

The Kenyan population should take advantage of the available loans on offer by the banks. Before applying for the loans, ensure you have looked at the costs of the bank loan and compared it with similar offers available in the banking industry.

What is the meaning of Anti-money laundering in Kenya?

Money laundering can be said to be the deposits of stolen or dirty money in the banking system with a view to make it clean. When money is gain in an unlawful way, the money will be introduced into the financial systems by purchasing goods or banking the same into a bank. The banks would rather that they are not used to clean this money and hence the anti-money laundering policies. The banks or financial institutions ask that all monies banked have a legal source.

The central bank of Kenya has published the legal obligations to be followed by the Kenyan banks for anti-money laundering. According to the CBK-prudential Guidelines 08/2006 “an Institution shall establish appropriate policies and procedures and train staff to ensure adequate identification of customers, their sources of funds and the use of the said funds. Such policies should ensure the effective prevention, detection and control of possible money laundering activities and terrorist financing.”

Core obligations of Banks for anti-money laundering in Kenya

• Know your customer (KYC), the financial institution must ensure to identify and verify the potential customer or business. Due diligence must be done.
• Record keeping. All the records of transactions between the bank and client must be kept for at least seven years of termination of the relationship or the last transactions is concluded. All KYC documents must be kept safely as evidence of due diligence carried out for KYC purposes.
• Reporting duties: The financial institutions must ensure that they report to the necessary authorities any suspicious or unusual transactions. The suspicions may be due to the huge amounts being deposited and withdrawn.
• Training and awareness creation: Employees must be trained on Anti-money laundering aspects. The clients must also be made aware of this policy. This may be through websites belonging to the financial institutions or newsletters and terms and conditions the clients sign.
• Internal operational rules and policies: policies and procedures on Anti-money laundering must be implemented in the operation of the financial institution.

Financial institutions and Banks may get involved in money laundering if they are negligent towards this policy or do not train their staff on the same. The banks must ensure that they are on the front line in fighting money launderers. Ill gotten gains should not be allowed to circulate in the financial systems. Anti-money laundering in Kenya must enforced by all financial institutions.

What are Children bank accounts

Children bank accounts are an important way to train up the young generation on savings and the value of planning for the future. Kenyans have been accused as a nation of people who do not know how to save.

Many Kenyans say they do not save because they have and earn so little. The discipline of saving has to start from the little that you have. This may mean that you are putting away even as little as 10 shillings a month. With the competitive nature of banking in Kenya, to open the children bank accounts has become easy. For as little as 200 shillings some banks will open the children bank accounts.

The children bank accounts are mainly applied for by the parents or guardians because the children under 18 years of age are considered as under age. Legally these children cannot have contractual dealings with a bank. The bank usually gives a ‘piggy bank’ to the child, to allow them to start saving their monies.

The parents need to look at children bank accounts that have high interest rates and other benefits like cheaper or free school fees cheques and discounts on school books or uniforms. Children bank accounts that do not any type of maintenance fees are more advantageous.

Introduce the children to their account and tell them about the account. Let them actually take the money they have to save to the bank. The account will then become a reality for them. If they are saving for a particular item, take them to the bank and let them see you withdraw the money to purchase the item. This makes them believe that the account belongs to them. The children bank accounts also show the child the importance of saving for items they want. The children stop thinking that it is easy to get money all the time and that when parents do not have money they cannot purchase items they want.

Some parents use the children bank accounts as their own savings accounts and do not let the children know about these accounts. some parents use the accounts as savings for school fees, medical for the child and other emergencies. This will ensure that the schooling of the children has been taken care of, sometimes up to university.

If a parent saves 1,000 shillings to a child’s account monthly, it would mean they save 12,000 shillings per year. By the time the child is 10 years, the account would have at least 120,000 shillings. By the time the child is in college, both the child and the parent know they have the tuition for college covered and so do not need to worry.

The children bank accounts also train the children on the basics of investments and returns. The parents or guardians should show the child how to balance the bank statement for their account and so they can know their balances.

It is important to have children bank accounts for your children, to train the children how to save. Many banks have also realised the importance of these Children bank accounts as sources of funds for the banks.