I got a little worried when I saw KCB’s Q1 09 results. Before the results,I had been convinced that KCB was poised to become the most profitable bank in Eastern Africa. I had therefore decided that I would attend this year’s AGM to get a feel of the mood of shareholders and Directors regarding the future outlook. However,when I got there I found a sea of humanity and calculated that by the time I negotiated the queue,the meeting would be over and so I left.



I would have have liked to ask the following questions:



Bad Debts expense

This increased 3 fold in 2008 with the total loan loss provisions at Kshs 3.7 billion,3 times more than the bank with the next biggest provision,Barclays which stood at Kshs 1.23 billion. One could argue that loans and advances at KCB grew by a much higher 46% vis-à-vis 3% at BBK. However the number 3 lender Co-op Bank grew loans by 38% but actually saw their provisions fall by 57.6% to 403 million. We have heard the rumours that the main culprit for the increase in provisions related to Triton. But as shareholders,our question is what is KCB doing to ensure that this money is recovered? In addition what steps is mgt taking to ensure that KCB does not continue to be the bank with the highest level of non-performing loans?



Regional operations

We have noted that finally KCB Tanzania has started making profits,after a full 12 years of operation? However with Total Assets of Kshs 6.4 billion,PBT of Kshs 32m is a poor return when compared to Diamond Tust Bank Tanzania (Total Assets – Kshs 5.59 b and PBT of 240m) or your Sudan operation with Total Assets of 10.12 b but PBT of 530 m. Operating expenses in TZ are almost twice as high as for South Sudan. What is being done to contain these high expenses? Note that in the last year,we have seen Equity Bank acquire Uganda Micro Finance for Kshs 2,925 million through a share swap. In the first half year of operations this has returned Kshs 231 million Profit Before Tax. In comparison,KCB’s investment of Kshs 470 million in capital resulted in a Kshs 187 m loss before Tax. Going forward,would it not then make sense to expand operations by means of acquisitions rather than setting up shop from the ground up?



Information Technology Upgrade

This was one of the reasons given for raising money from the rights issue last year. We understand that the TEMENOS T24 system has now been implemented. At what cost was this done and has the system fully stabilised? There have been some unsubstantiated rumours that the new system has not quite lived up to expectations. How true is this and can you give an indication of the benefits realised perhaps by citing some statistics such as the number of accounts that it can support,amount of time being saved in transaction processing,staff productivity etc?



Thank you Mr. Chairman.



If any SKerians attended this AGM and any answers were provided,or you are able to get the answers somehow,please feel free to post them.



Opportunity calls but few respond.

Good questions,well worded !!!

AFRICAN INVESTOR

@Mwanahisa......

On your 3rd point,I work in IT with a bank using T24 Temenos and know some little stuff bout KCB on the same.

KCB bought Temenos T24 banking system at around 1.2Billion Ksh. The problem is that they did less than required when it came to analysis and implementation and as a rersult things are not going well.T24 Globus is one of the few modern core banking systems with a good user interface.....problem is that they had old users who had not seen this kind of system or even used it..........implementing it became difficult due to users and they had to sack a few and replace them with college graduates who had not worked with another system.

Another problem is the cost of T24 sys admins.There are like only 21 good ones in Kenya and they earn more than SAP consultants.They advertised for T24 admins and consultants and when the few apllied....they applied in dollars.........and none was asking for less than 960,000 per month.

Sooner or later they will have to hire some few guys for over 1M/ month salary coz the cost of failure and penalties from CBK is even higher.

The course of the world is changed by those who dare dream!

True,KCB got the browser based version of T24 while all other banks using it have a desktop version.It was not very well implemented plus link problems to the main server can cause crazy slow ups.The advantage of browser based T24 is that IF well done......you could save huge costs in maintenance and upgrade of the system from the central server rather than going to upgrade each users machine as is the case with T24 desktop(they have branches in Eastern Africa).

In my opinion......they need very experienced head tellers and then have young tellers with thorough training serving customers.On the other hand.......T24 training is expensive and time consuming for new tellers!He he!....Damn!

The course of the world is changed by those who dare dream!