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Enhanced loan provisioning to cushion for a bounce-back
How has COVID-19 disrupted your operations?
The pandemic has fundamentally affected the bank in two main ways: reduced physical interaction to contain the spread of the virus and the economic slowdown that affected our customers, and hence our business. The transition to remote operations has meant investing in infrastructure to ensure that work continues seamlessly. It has also necessitated a shift in operations with Team A/B arrangement being put in place to minimize staff numbers within branches and our other premises and for purposes of business continuity. Technology has helped us overcome this challenge to ensure that we keep our staff and customers safe at all times. With regard to the impact of the reduced economic activity during this period, our customers have been affected significantly – both as businesses suffering reduced revenues; and individuals who have had incomes reduced or completely lost. As a bank, we have instituted measures to cushion our customers during this difficult time through loan restructuring as well as a waiver of digital banking fees.
What was the impact of Covid-19 on your performance in 2020 and in Q1 of 2021 so far?
Interestingly, our 2020 numbers were reasonably impressive, with profit growing 167% compared to 2019. This was largely driven by our corporate and retail franchises, which remained resilient in the subdued economy with reduced activity across sectors. This translated into a growth in deposits and loans.
Is there a lasting impact of this pandemic on your business?
The pandemic’s most enduring impacting has been the accelerated digital transformation of our business, in terms of channels as well as operations to make remote working possible and seamless. We are noting increased adoption of digital channels by customers. Our attention is to increasingly invest in technology.
Are there any lessons that you have learnt as a result of the pandemic?
The pandemic has reminded us the uncertainty in the business environment, including factors we previously did not consider in our projections, such as the pandemic. Nonetheless, it has had far reaching impact on our operations.
How do you intend to leverage on these lessons going forward?
This lesson will come in handy during risk assessment and especially in the development of our business continuity plans. We have also gleaned insights on the vulnerability of our customers and look forward to working with them to future-proof their businesses.
If a crisis of this nature were to strike again what would you do differently in-terms of your preparedness and your reaction?
Preparation is a big part of winning a crisis. Thus, we intend to continuously enhance our preparedness to put us in good stead of overcoming such challenges in future.
How has your crisis management system held in the period of this pandemic?
The bank’s crisis management team has provided astute leadership in dealing with the pandemic and its effects. They helped mobilise the NBK family to respond effectively and efficiently. Working together with the rest of the KCB Group, we have been able to weather it, paying attention to safety of staff and customers.
How are you mitigating against the heightened risks in your business environment posed by this pandemic?
We have had to make enhanced loan provisioning to cater for this heightened risk and minimize exposure of the business. The loan restructuring that we offered to our customers is also meant to cushion them to ensure that they stay afloat and can bounce back.
How have you managed the short-term liquidity and financing challenges occasioned by this crisis?
Fortunately, the crisis came at a time when the bank was in a strong liquidity position, thanks to the turnaround efforts, backed by capital injection from KCB Group, as well as synergies arising from being part of this strong family. Thus, we have not faced any liquidity or financing challenges
How do you see recovery from the disruption in demand in the aftermath of this pandemic?
We expect recovery to follow gradual reopening of the economy. At the beginning of 2021, before the third wave necessitated containment measures, we were already seeing pockets of recovery in certain industries and sectors, including education and manufacturing. When the current measures are lifted, we expect recovery to kick in. The ongoing vaccination will also minimize impact of the pandemic, thus accelerating recovery
SME have been hit hard by this pandemic. How do you see them recovering and what role are you playing?
At NBK, we take keen interest in MSMEs in recognition of the important role that they play in society. MSMEs are the lifeblood of the economy, providing employment opportunities and sustaining value chains and ecosystems. Even before the pandemic struck, we have always prioritized them. The pandemic has disrupted this sector a lot more, resulting in reduced operations, with some going under; and hence job losses. We are supporting MSMEs to weather the storm by cushioning them from its impact. NBK will continue to play a supportive role both through capacity building and financially to tailor solutions for the SMEs.
Is your business model resilient enough to counter the impact of this pandemic?
Yes, this has been demonstrated by the financial performance in 2020, despite the effects of the pandemic. We believe that our model remains resilient to weather the pandemic and its future effects.
What has this pandemic taught you about leadership?
That there is need for clarity in leadership to mobilise the teams to overcome a difficult phase. When all are clear on the direction and work towards it, it significantly enhances chances of success.
People’s well-being is a high priority during a crisis of this magnitude. How have you ensured the well-being of your customers and employees?
Our operations have paid strict attention to public health guidelines to contain the spread of Covid-19, including the requirement to wear masks and sanitise. This has helped keep our staff and customers safe during the pandemic.
The importance of communication became very apparent at the height of this crisis, how did you handle it? Did you have any challenges?
We have strived to maintain open channels of communication. We did this through our internal communication channels (mailers and WhatsApp) and regular webinars. This helped in demystifying the new disease while educating staff, customers and other stakeholders on how to protect themselves.