Financial sector appoints new blood to contain drop in earnings
Company bosses are the first to be celebrated when shareholders rake in dividends, they are showered with bonuses and given ambitious targets to continue riding the tide.
However when the going gets tough, they will be the first to walk the plank, sacrificed perhaps to appease rowdy shareholders or just to make way for new ideas.
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Kenya’s financial market has seen one of the highest management turnarounds as companies struggle through an extended tough economic period.
Banks including UBA, GT, State Bank of Mauritius, Family, Housing Finance and Jamii Bora, and insurer Sanlam are just some of the institutions that have juggled the corner office seeking new ideas in a tough market.
Mortgage financier Housing Finance (HF) is also set to get a new boss following a decision by Group Managing Director Francis Ireri not to renew his contract ending March 2019.
“We are confident that due to his early notification there is adequate time to identify a substantive replacement and facilitate a flawless transition,” HF board chairman Steve Mainda wrote to Capital Markets Authority.
In July, HF announced plans to fire 36 workers, including senior managers and restructure the business. This included launching a mobile lending platform, HF Whizz, under its newly created position of chief digital officer and trade marketing interventions under the aegis of digital financial services.
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The role of a chief commercial officer has also been created in the new structure.
The struggling lender, which issued a profit warning early this month, posted a loss of Sh332 million in the nine months to September, down from Sh159 million profit last year.
Another mortagage lender that has been rebuilding its business under new management owing to tough times is Shelter Afrique.
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The bank plunged into uncertain territory after its former head of finance, Godfrey Waweru, blew the lid on former managing director James Mugerwa over involvement in banking malpractices and abuse of office.
Shareholders were up in arms and a forensic audit pointed out weaknesses in the company’s lending profile that had exposed it to defaults and restructured loans. It also cited balance sheet problems that proved the lender illiquid.
Some of the dud loans included that extended to the demolished Taj Mall, Translakes Estate in Kisumu, Eden Beach Resort in Shanzu and Pine City in Athi River.
To turn it around, acting boss Femi Adwole froze lending, helped restructure its short term loans and sought financing rounds from shareholders.
Early this year, Adewole left and has now been replaced by Zimbabwean national Andrew Chimphondah even as the company announced it will shed 13 employees this year.
Some of the leading figures who left the lender include Oumar Diop who was serving as the acting Deputy Managing Director and Vipya Harawa who was the Company Secretary and Director of Legal, Risk and Compliance.
The mortgage financier is also looking for a new chief operating officer, head of New Business Services, head of Enterprise Risk and manager for Policy Partnership.
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Shelter Afrique had 106 projects in Kenya alone, out of which some have been completed, cancelled and a third are still being constructed but has changed its model from directly funding construction companies.
The lender said it plans to focus on lines of credit to financial institutions to finance housing solutions, technical and financial advisory services for large-scale affordable housing solutions; and project management, as well as technical and financial advisory for public-private partnerships.
Housing Principal Secretary Charles Hinga has also joined the lender’s board, which may give the firm a foothold in the Government’s half a million housing plan.
Jamii Bora Bank, which has struggled since the aftershocks of the collapse of Imperial Bank, has hired a banking turnaround consultant and changed its chief finance officer, and heads of human resource and credit.
John Bainton, the turnaround consultant, is supposed to lead the bank into getting a strategic investor or a possible merger with a leading bank.
The lender has also hired John Kamara as the new CFO, John Wamati to Head HR replacing Wangari Gathu and James Macharia as the Head of Credit replacing Dickson Njeru.
In the board, the lender has tapped constitutional lawyer Paul Nyamodi and start-up founder for Soko Safi Samuel Mburu to help penetrate the small enterprise and Sacco markets.
In fact, the lender has remodeled its business to focus on stock-backed small and medium enterprise loans, a segment deserted by other lenders after the rate cap, over higher risks involved.
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“One of our innovative products is providing stock financing through the Boresha Stock loan, which has seen retailers and wholesalers of fast-moving goods get weekly facilities to satisfy customer demand with a potential of reaching the 1.56 million licensed MSMEs in the country,” a source at the bank said.
The bank also introduced a tender hub in April that gives its customers a place to view all published tenders, assist to make the applications and walk with them throughout the trade cycle through bank guarantees, LPO financing and invoice discounting facilities.
Family Bank, which was hit hard after it was punished over National Youth Service payments, rolled back to stability under David Thuku, who replaced Peter Munyiri in June 2016.
The bank credits Dr Thuku for steering it through a turbulent period following a run on the bank in late 2016 on the anxiety after Chase Bank’s collapse and an attack from a malicious online rumour following the NYS scandal.
Family Bank, which posted a net profit of Sh187.7 million in the nine months to September from a loss of Sh743 million in a similar period last year, is now being steered by acting Managing Director and Chief Financial Officer Charles Njuguna.
Investment firm Sanlam released Chief Executive Mugo Kibati in February and appointed George Kuria, the general insurance chief executive, to serve as the acting group CEO as it scouted for a replacement.
In August, the listed firm hired Jubilee Insurance boss Patrick Tumbo even as it spiralled into a profit warning this year.
The firm has lost almost Sh2.265 billion in three years to Chase Bank, Imperial Bank, Athi River Mining, Real People and now Kaluworks, forcing it to reassess its investment muscle.
Mr Tumbo announced that the insurance firm will institute management changes that will likely see those who signed off the bad investment edged out.
The company has also decided to focus on insurance business rather than bonds that will take away business from fund managers.
“The business will be adopting a variety of remedial interventions. This, which also features the firm’s management team reorganisation, (is) expected to accelerate growth from alternative growth market segments and new revenue streams including an enhanced focus on the firm’s general and life insurance business,” said Tumbo.
Nigerian lender GT Bank also hired a new boss for its local operations this year. Managing Director Jude Olabayo Veracruz previously served the same lender as MD of Rwanda, group chief operating officer of East Africa and executive director since 2013.
His entry may have rocked the boat with some of his workers pushing for his exit in the face of the culture change.
In a letter addressed to the Banking Insurance and Finance Union, a junior employee complained of working long hours, harassment and threats by the new boss to fire the staff and get younger, cheaper workforce.
Mr Olabayo however denied this, saying that he was following standard practice by involving staff in coming up with a strategic plan which required meetings on Saturday.
“We could have hired a consulting firm and just let them bring a document, but we decided to involve the staff and only called for a meeting on Saturday to consult workers,” he said.
UBA Bank also tapped a regional executive Emeke Iweriebor, to replace Isaac Mwige in an acting capacity. Mr Mwige is said to have resigned to pursue personal interests.
The Lagos-based lender has recently been exposed to bad loans in Nakumatt Holdings, Uchumi Supermarkets and Deacons East Africa but managed to post Sh15 million net profit for the nine months to September, up from Sh14 million last year.
“The bank remains on a steady growth trajectory and is expected to post similarly positive profit-before-tax and balance sheet growth at the end of this year,” a UBA spokesperson told Weekend Standard.
“As evidenced by the performance of the bank, there were no challenges facing the previous UBA Kenya management.”
The State Bank of Mauritius had to navigate new waters with a hard entry into the Kenyan market as it acquired Fidelity Bank, then went ahead and bought Chase Bank’s good books together with its workers.