Nairobi — West Africa-based United Bank for Africa has welcomed the move by Africa's central banks to impose stricter controls on commercial banks to ensure that operational risks are well covered.

In an exclusive interview with The EastAsfrican, the bank's chief executive officer incharge of Kenyan operations, Manz Denga said the risks facing the sector are significantly complex and therefore adequate reforms should be pursued to cushion the banks from risks that could be detrimental to them.

According to Mr Denga, the reforms should focus on sound risk management as well adequate capitalisation. "It is the robust supervision by regulators that African banks have been insulated from the current economic crisis, otherwise the effects would have been detrimental," Mr Denga said.

Only recently, Nigeria's Central Bank sacked leading bank managers in more than five banks in the country citing undercapitalisation, an act that made them "over-exposed" to risks.

In what could spur the bank's expansion strategy on the continent, Mr Denga told The EastAfrican that UBA is well capitalised and had put in place strong risk management strategies to mitigate any arising risks.

Only last month, Nigeria's Central Bank commended UBA for its robust risk management policies and strong liquidity, a move the bank said had enabled UBA become one of the leading bank's on the continent.

"In our just released third quarter financial results for the period ended June this year, we posted gross earnings growth of more than 34 per cent to $1.04 billion. This was as a result of 51 per cent growth in interest and discount interest income as well as improved contribution from operations outside Nigeria, which accounted for 11 per cent of total gross earnings," Mr Denga said.

To cushion itself from the challenging operating environment, the Group made an "exceptional" provision of $138.4 million "to buoy its reserves for current and potential diminutions in capital market exposures and other assets."

"Over 80 per cent of the exceptional items relates largely to provisions on our capital market exposures with a likelihood of being written back as sentiments at the equity market suggest the outlook is positive. Besides, analysts are of the opinion that the equity market is currently undervalued," reads part of the Group's financial results.

In June, the UBA, which is set to roll-out its operations in Kenya in a few weeks' time, adopted International Financial Reporting Standards, Basel II and "other global standards" in governance, financial reporting and risk management.

"Given that the Central Bank of Nigeria (CBN) has set 2012 as the deadline for Basle II implementation, we do not have an urgent compliance deadline but have decided to adopt Basel II as a key enabler of business management and development," he said.

The bank plans to open branches in Westlands, Industrial area and Upper Hill. Mr Denga says UBA will put in more than $15 million as initial investment in Kenya.

This comes at a time the country is seen as "overbanked" with over 40 mainstream players and a host of other financial institutions battling out for market share.

Despite tough competitive environment in Kenya especially from mobile banking, Mr Denga says UBA's services, which will ride on technology, will find takers.

"We are coming up with competitive products. Our customers will open accounts free of charge. We will not have minimum balance requirements. Our solid financial base will of course play a critical role in this quest," he said.

UBA, which already operates in Uganda, is also eyeing Tanzania, where it expects to set foot next month.

"In less than eight months after our launch in Uganda, we managed to open 10 branches. Today, the number of Ugandans with active bank accounts has increased from two per cent to 10 per cent," Mr Denga said.

The bank is also said to have applied for operating licences in Rwanda and Burundi. It becomes the second bank from West Africa to enter the Kenyan market. Lome-based Ecobank entered Kenya last year after buying 75 per cent stake in EABS Bank.

Mr Denga said UBA joins the East African market aware of the stiff competition ahead, especially from big players, but said it would target the unbanked.

(Source : allafrica.com)