Third-tier lender Sidian Bank plans to send home at least 108 of its 506 staff at a one-off cost of Sh70 million, it announced yesterday, underlining the pressure in the industry to enhance efficiency amid slowing revenues.
Sidian, which rebranded from K-Rep in April, said the voluntary early retirement scheme is, however, not a cost-cutting measure. It is part of staff realignment to its transformation strategy to become tier-two lender by 2019, chief executive Titus Karanja said.
He said the retrenchment will not necessarily result in lower staff costs, stressing that its growth strategy requires staff who are tech-savvy, entrepreneurial and with a “culture that supports diversity of thought”.
“We are transforming our staff into banker of the future,” Karanja told a press briefing in Nairobi. “We are offering our people an opportunity to decide 'do they wish to invest into becoming the banker of the future or invest in getting out now, so that we can align our people towards the bank of the future?'”
Mid-sized Family Bank was the first to publicly declare a voluntary retrenchment programme at the beginning of the month, but did not disclose the numbers targeted.
The bank said the scheme is part of its “ongoing transformation strategy that entails assessment of our overall structure and resources, with a focus on deploying capital efficiently to improve overall performance”. Interested Family Bank employees had 14 days to October 14 to apply.
The banking industry fired 2,036 staff, largely in clerical and secretarial units, in 2015 as lenders automated their systems to enhance operations, the Central Bank said in Banking Supervision Annual Report.
The capping of interest on loans at four percentage points above 10 per cent Central Bank Rate (14 per cent) has put pressure on margins, which were 70 per cent driven by interest earnings before the law was enforced on September 14. This has piled pressure on lenders to enhance operational efficiencies to cut costs, with Sidian projecting a 40 per cent hit on its earnings this financial year.
“There is no question that efficiency has to come into play...when you have such reduced margins. Hopefully this (interest controls) will bring more customers to the banks who will be willing not just to borrow but also to save,” NIC Bank CEO John Gachora said on September 14.
Analysts have said large banks are better positioned to weather the interest caps storm due to economies of scale, building a case for consolidation among smaller lenders in the near to medium term.
“It is the large banks who will be able to adjust easier to interest rate capping relative to smaller banks,” Britam chief executive officer Kenneth Kaniu said on September 27. "Smaller banks tends to deal more with niche market which has higher risk borrowers."