Category Archives: Bank rankings

KCB to acquire National Bank of Kenya

KCB has made an all-share offer to acquire National Bank of Kenya in a not too unexpected move. Kenya’s largest bank will acquire the private, but state-controlled, NBK that was wrestling with an undercapitalized position.

KCB will acquire NBK, which has assets of Kshs 115 billion by offering 1 share for every 10 NBK shares. KCB trades at about 45 and NBK at 4.5 and this puts the offer, after conversion of NBK preference shares into ordinary ones, at about Kshs 7 billion. NBK has deposits of Kshs 99 billion and loans of Kshs 47 billion. It issued a rather late profit warning just before reporting a pretax profit of Kshs of 587 million for 2018, in March this year.

Bank shareholders: The NBK results notice also mentioned that its principal shareholders had committed to increase the capital of the bank a year ago. The Government of Kenya and the National Social Security Fund (NSSF) are significant shareholders in both KCB and NBK. At KCB the Government owns 17.5% and NSSF 6.12% while at NBK, the workers’ fund has 48% and the Government has 22.5%.

This deal presents an opportunity to rescue National Bank whose capital to asset ratio had dipped to 3%, far below the statutory minimum. The Government has grappled with how to restructure its portfolio of struggling banks and this option is a cash-less one that will see it and NSSF increase their shareholdings in KCB as other NBK shareholders gain by obtaining shares in the Kshs 714 billion KCB, the regional banking leader. Trading of shares of both banks was briefly halted on Friday morning, prior to the announcement.

Conditions of the deal to go ahead include approval by 75% of NBK shareholders (NSSF and the government own a combined 70% of the shares), while the Government is to also convert 1.135 billion preference shares in NBK into ordinary shares, representing a recapitalization of the bank by Kshs 5.7 billion. Also, if the deal is concluded, NBK will be delisted from the Nairobi Securities Exchange.

Banking M&A: KCB is now in the process of acquiring two banks – NBK and Imperial as two weeks ago the CBK and KDIC announced an improved offer deal with KCB for Imperial’s assets. The deal news comes in a week after NIC and CBA shareholders approved a merger of their banks.

It remains to be seen if Equity and Stanbic, which have expressed takeover designs on NBK over the last decade, will put in a bid for NBK. And also what will happen to other banks in similar positions of being in dire need to raise capital from their shareholders to meet statutory requirements.

Bank Rankings 2018 Part II: New Entrants

Following an earlier ranking of the top banks based on their asset size at the beginning of the year, what are Kenya’s top banks likely to be, nominally based on asset size at the end of the year? In 2018, Interest rate caps and IFRS9 have had an impact on bank performance while the departures of Imperial and Chase banks were announced.

Ranking using September 2018 numbers 

1. KCB Group – Kenya bank assets of Kshs 594 billion assets (and group assets of Kshs 684 billion).

2. Equity – Kenya bank assets of Kshs 424 billion (and group assets of Kshs 560 billion).

* 3 CBA/NIC – combined assets of Kshs 425 billion (as at September 2018) – if an announced merger deal is approved and completed. CBA and NIC are ranked 9 and 10 by assets, and will leap-frog Cooperative Bank, Barclays Kenya, Diamond Trust, Standard Chartered Kenya, Stanbic and Investment & Mortgages (I&M) banks.

4. Co-op Bank Kenya – asses of Kshs 398 billion.

Other new and interesting bank changes this year; 

12.  State-owned National Bank is in search of a shareholder deal to boost capital.

15.  SBM Kenya. The State Bank of Mauritius completed a carve-out and rebranding of assets, staff, branches and customers of Chase Bank in August. For the third quarter of 2018, it reported assets of Kshs 75.5 billion up from 11.7 billion in January 2018. It now has customer loans of Kshs 12.4 billion, customer deposits of Kshs 53.6 billion, and government securities of Kshs 34.8 billion. SBM entered Kenya two years ago by taking over Fidelity Bank that had assets of Kshs 15 billion in 2015 for just $1. KCB also is expected to conclude a takeover deal for collapsed Imperial Bank in 2019.

39. Mayfair Bank was licensed to operate in June 2017 and began operations later in August. Mayfair now has Kshs 5.3 billion in assets and operates three branches in Nairobi and Mombasa.

41 Dubai Islamic Bank – Kenya (DIB Kenya) with Kshs 4.1 billion in assets was licensed in April 2017. It, is the third Shariah-only bank in Kenya, after Gulf African (No. 23 with Kshs 32 billion of assets) and First Community (No. 31 with Kshs 16 billion assets). DIB Kenya is a fully-owned subsidiary of Dubai Islamic Bank which is one of the largest Islamic banks in the world.

$1 = Kshs 102.

S&P ranks top banks in MEA (Middle East & Africa)

Qatar National Bank (QNB) with $229 billion of assets is the largest bank in the Middle East and Africa (MEA) zone according to S&P Global Market Intelligence. It is followed by First Abu Dhabi with  $182 billion and then the top African bank, which is the Standard Bank of South Africa (Stanbic) with $164 billion of assets. Fourth and fifth are banks from Israel which S&P notes rose on the list due to the appreciation of the country’s Shekel currency versus the US dollar.

S&P MEA top bank origins

South Africa has the most African banks on the list with First Rand (ranked 8), Barclays Africa with $94 billion of assets and which is rebranding to Absa is ninth, while Nedbank and Investec are in 13th and 27th place respectively on the S&P list.

Other African banks are the National Bank of Egypt (14)  and Attijariwafa of Morocco (23 ). QNB, which has been publishing quarterly results in Kenyan newspapers alongside other commercial banks, is also the second largest shareholder of Ecobank of Togo, but there are no Nigeria banks or any Sub-Saharan ones from the East or West blocks of the continent on the MEA list. Kenya’s largest bank group – KCB has about $6.5 billion of assets.

QNB and the banks on the MEA list are ranked according to IFRS accounting principles but certain banks use local accounting measures e.g Israeli GAAP, Eqyptian GAAP and Qatari GAAP.

The MEA banks are a sub-set of S&P’s list ranking the largest banks in the world. The list was topped by four banks from China, led by the Industrial & Commercial Bank of China with $4 trillion of assets, followed by China Construction Bank, Agricultural Bank of China and the Bank of China. There is more diversity after that with Mitsubishi UFJ of Japan in 5th place with $2.8 trillion of assets, followed by  JPMorgan Chase (USA), the UK’s HSBC and in 8th place is BNP Paribas of France with $2.3 trillion of assets. Eighteen of the top 100 banks are from China, with $24 trillion of assets, the US had eleven banks and Japan has eight banks, but none from the MEA.

Bank Rankings 2018 Part 1: Kenya’s Top 10 Banks

2017 was a more challenging year for Kenyan banks, and borrowers due to interest rating capping, elections affecting Kenya’s economy, the crunch in South Sudan, while 2018 will be more interesting with IFRS9. Here is a ranking of Kenya’s top banks, and the rankings are by bank assets as at December 2017 – and compared with the previous years’ rankings (in brackets):

1 (1) KCB: Assets of Kshs 555 billion and a pre-tax profit of Kshs 27. 5 billion. Have 13 million mobile customers, and 57% transactions were done on mobile devices, 15% by bank agents and 10% at bank ATM’s. However, KCB did not roll out a new digital strategy direction in 2017 as earlier announced. Combined group assets were Kshs 646 billion (US$6.4 billion).

2 (2) Equity Bank:  Focused on fee income, transaction processing and treasury business over interest income, and their CEO said micro-lending will only resume after interest rate caps are lifted.

3 (3) Cooperative Bank.

4 (5) Standard Chartered Kenya.

5 (4) Barclays launched Timiza app in 2018 which should enable a big retail banking leap. It will also begin a process of rebranding to Absa.

6 (6) Diamond Trust: Bought Habib bank.

7 (8) Stanbic Bank (formerly CFC Stanbic)

8 (7) Commercial Bank of Africa: Now in five countries after using M-shwari to expand to Ivory Coast and Rwanda – where they recently acquired Crane Bank Rwanda.

9 (10) NIC Bank.

10 (9) Investment & Mortgages (I&M):  Assets of Kshs 184 billion, and pre-tax profits of Kshs 7.5 billion. They have fully absorbed Giro Bank and are now in Kenya Tanzania, Rwanda, and Mauritius. Group assets of Kshs 202 billion (US$ 2 billion)

11 (11) National Bank.

More rankings to follow. 

Banking History in Colonial Kenya

This morning there was a talk given by Christian Velasco of Warwick University on A Colony of Bankers: New Approaches to Commercial Banking History in Colonial Kenya. He said there have been very few books written about the early banking history of Kenya and East Africa and he had sourced information from the Kenya National Archives in Nairobi, and scattered bank archives in the UK, South Africa, or Australia, but that many records were now lost.

Excerpts 

There were the banks that came before the first World War and a raft of banks that started after the end of the Mau Mau war – and the banks could fall into three categories: Colonial banks (state-supported banks that were the only ones that could handle government accounts, and which disappeared after independence), Imperial banks (less dependent on government business, and who focused more on trade and agriculture) and multinationals (who had most of their business abroad).

The story is of Kenya’s colonial banking era is really about three banks – the National Bank of India (NBI), Standard Bank of South Africa (SBSA) and Barclays. The arrival of Barclays in Kenya changed the banking sector greatly as it sought to end the long relationship that the National Bank of India had with colonial government in Kenya. Also when Barclays arrived, they found that the Standard Bank controlled many of the white accounts, so they set out to include more Africans as customers. Africans had bank accounts from around 1926, and by the 1950’s Barclays had more African accounts than settler accounts. 

Banks were mostly found in urban areas and with the ending of the Mau Mau uprising, there was an expectation that Kenya would remain a British colony for many decades. This resulted in several new banks setting up in Kenya in the 1950’s. Meanwhile, NBI, SBSA, and Barclays all expanded by 100% opening up in new places around the country, even with mobile bank units to attract customers. Despite the arrival of the new banks, the main competition remained between these three established big banks, and in 1954, Barclays sent a memo to the colonial government complaining about the unfair practice of them favouring the NBI who retained a monopoly of new business that dated back 60 years. 

All banks eventually had to break with colonial past and the British empire, and a big loser in the period was SBSA which had concentrated on the white settler population. Kenyan politicians tried to engineer boycotts of businesses related to South Africa due to the Apartheid regime and African customers now shunned it. Officials at the bank wrote to their headquarters about the problem and as a result, the name was changed by dropping “South Africa” from the name, and SBSA became “Standard Bank.”

However Africanization of staff did not start until quote late – Barclays had 1,000 employees, and just 70 were Africans with many more who were Indians. There was a hierarchy in banks of having whites being top managers, middle jobs were done by Indians and Africans, the clerical jobs – and this was because customers did not want to deal with African staff.