Category Archives: Barclays

Barclays Kenya 2016 Financial Results

Today, Barclays became the first Kenyan bank to release its financial results for the year 2016, which was a tumultuous year for the Kenya banking sector.

New bank chairman Charles Muchene said the year saw challenges with new business models, interest rate caps and the announcement of the parent sale. He also praised his predecessor, F. Okello.

Thereafter CEO Jeremy Awori said that while Kenya’s economy looked stable with an enviable economic growth rate, a stable currency and moderate inflation, the dip in shares at the Nairobi Securities Exchange and profit warnings issued by various companies showed some the struggles that companies, including their customers, were going through. He added that challenges at some banks had resulted in increased regulatory scrutiny and audits on systems, anti-money-laundering, and insider lending all other banks, and Barclays had passed. Also, that  2018 will bring new rules on impairment (bad loans) and capital requirements.

They had the investment in technology by going paperless and customer focused channels including intelligent ATM’s that allow 24-hour cash deposits, as well as enhancing internet and mobile banking. They have also invested in alternative channels and were the first international bank to embrace agent banking in a deal they signed with Posta Kenya under which they would have post offices in far-off places (like Wajir) act as customer interaction points for the bank.

Bank branches handled 43% of transactions in 2016, which was down from 59% as other channels recorded increases with ATM;’s handling 34%, digital 14%, and POS 9%

Summing up the financial results for the year, Barclays assets grew by 8% to Kshs 260 billion, deposits went up 8% to Kshs 178 billion while loans went up 16% to Kshs 169 billion. Interestingly 68% of bank deposits don’t earn interest (they are in transactional accounts). Also, the loans increases were mostly in the first half of the year while those after the interest rate cap law (passed in September 2016)  were mostly existing customers topping up their loans.

Income went up 8% to Kshs 31.7 billion as expenses also went up 8% to Kshs 16.9 billion. But there was a huge jump in provision got bad loans, which more than doubled, to Kshs 3.9 billion and this resulted in pre-tax profit dipping from Kshs 12 billion to Kshs 10.8 billion. 90% of the impairments were from retail/ personal lending.

The dividend for the year will be Kshs 1 per share – comprising an interim dividend of 0.2 per share and a final dividend od 0.8 per share – unchanged from 2015. The payout will be a total of Kshs 5.43 billion (~$54 million)

Going forward, digital and automation will be key drivers to give customers better and efficient experiences. Barclays also plans launch new mobile banking products soon, and to become a financial technology partner to their customers, not just a bank.

Africa in 2017: Barclays Forecasts

Today Barclays Africa economists gave their forecasts on Africa and specifically Kenya for the year 2017 at an event that featured several roundtables sessions.

  • Populism: During 2016 the world changed in terms of two surprising votes in the US and the UK that reflected an inward focus. The votes in those countries were driven by populations who felt that their politicians were not pushing their agendas  on matters such as trade and immigration. Also while incomes of the rich & poor have been improving, those of the middle class have stayed stable or declined.
  • US President-elect Trump is expected to reduce the US corporate tax rate which  may woo companies to bring back some of the $2 trillion profits sitting outside the US.
  • barclays-africa-forumBanks are seen as making too much money and not playing their part in society – this has resulted in things like the interest rate cap law in Kenya.
  • Reaching  Entrepreneurs: There are 40-50 million emerging SME’s in Africa but only 1/5 of them have access to capital, and this is because banks ask for collateral
  • Banks operate in cash driven economies and many entrepreneurs don’t want to share information. Banks also have to collect a lot of documentation that bothers customers.
  • Barclays is committed to making sure there’s no systemic risk from their exit from Africa, and that its customers will continue to get good service in all the 10 markets
  • Barclays has a platform called Rise with centers in London, New York, Cape Town, Mumbai, Tel Aviv where they partner with companies on ideas to be implemented.
  • Africa: The continent  is now becoming a bit more fragile, and for the first time in a decade, Africa is going to grow at a slower pace than the global average 3.5% (but if you exclude  South Africa and Nigeria), the growth is still above average for most
  • African countries have been spending much more than their revenue and the years of deficits have eroded Africas strong starting point. Going forward, African countries will face higher financing cost and lower capital inflows.
  • Brexit Impact: 45% of FDI into Africa comes from Europe and  Kenya gets 23% from the UK.  But the pound has continued to weaken since the vote and this will result in reduced global demand for African exports, less tourism from UK/EU, and reduced remittances from African migrants
  • Kenya: The shilling currency has been weakening at a lower rate than its peers. This could make exports expensive and widens the current account deficit. It’s possible that the Kenya shilling  could depreciate to  110/$ over the next 12 months. This is mainly due to the expected dollar strength against all currencies. Kenya has strong exchange reserves and can tap an IMF precautionary fund to cushion shocks.
  • East Africa:  Trade lags the rest of the world. Since East African borders “opened up” around 2010, Kenya’s exports to the EAC have only increased by 8% compared to 50% to the rest of the world.

Nairobi debate on BREXIT

Yesterday there was a debate in Nairobi on the UK’s referendum on EU membership, on which there will be a vote in the UK (and Gibraltar) on June 23. Europe is the second largest destination for Kenya’s exports (after the rest of Africa) and the UK is second in Europe with about Kshs 40 billion of exports from Kenya, slightly behind Netherlands (a destination for flowers). Overall, the UK is the fourth largest destination of Kenya’s exports (after Uganda, Netherlands, the US), and it imports about the same amount from the UK (Kshs 42 billion).

The debate was sponsored by the St. Paul’s Property Trust and had  Aly Khan Satchu (as the moderator), Graham Shaw (Brexiter) arguing for Britain to exit) and Chris Foot (Remainer)  arguing for Britain to remain in the EU).

 Reasons  to BREXIT

  • If #BREXIT doesn’t happen now, Britain will beholden to unelected decision-makers in Brussels for the next 40 years. Other countries will soon have similar votes.
  • The (bureaucratic) EU has 5 laws on pillow cases, 109 on pillows, and 12,000 on milk.
  • Germany bailed out Greece, and the EU will soon have to bail it out again (Italy is also shaky)
  • EU laws limit Britain’s ability to get top talent (e.g from Kenya) as they have to give preference  to the EU states.
  • Under the EU, the production of a country is controlled (they may have to destroy fishing boats, and Portugal’s wine industry was destroyed by the EU).
  • Britain will have to renegotiate trade deals with 28 (and maybe 32) countries, but probably has no interest in trading with 10 of them.
Brexit debate in Nairobi

Brexit debate in Nairobi

Points against BREXIT

  • The great Winston Churchill wrote a book title “Europe Unite”.
  • 56% of Britain exports are to the EU, – don’t BREXIT.
  • The last time the UK thrived outside the EU, it had a protectionist market called the colonial empire. 
  • There has not been much discussion about the positives of being in the EU – only the negatives – and that is not enough reason to leave.

Audience

  • Impact on Barclays Premier League (BPL)? : Arsene Wenger (Arsenal manager) asked Britain to stay in the EU (which is a huge global export, but how many in Europe watch the BPL ?).
  • The world is moving towards integration  (e.g The East African Community).
  • The rise of nationalism in Europe is a concern.
  • Britain at 16%, is Europe’s biggest export market, ahead of the US (14%), and China (8%).

Also see this forum, with the (then) High Commissioner from Britain to Kenya in which he discussed the relationship between the two countries.

M&A Moment: June 2016

Various deals in the last few weeks and months in East Africa

Banking:

  • Barclays sold 12% of Barclays Africa for $873 million, reducing its’ stake to 50.1%. In Kenya, the Central bank said their feel like `flower girls’ in the Barclays exit for which Barclays says it has attracted ‘over 100’ offers.
  • At Chase Bank suitors are lining up to buy the bank that’s now out of receivership. KCB and QNB of Qatar are tipped as leaders, but there are as are a few other mid-size banks said to be interested.
  • Cooperative Bank plans to do a joint ventures to expand into Ethiopia and Rwanda following in the model that was succesful in South Sudan. This will be in partnerships with co-operative societies in those countries.
  • Credit Bank is seeking an additional Kshs 5.4 billion from an investment group. The bank is wooing Fountain Enterprises Programme (FEP) to buy to 70% of the bank via a private offer priced at Kshs 180 apiece and limited to members of the chama (investment club) which has a large following in the UK and US. (via Biz Daily)
  • CBK has rejects takeover bids by 7 suitors of collapsed Dubai Bank, as the proposed investors have not provided bona fides.
  • Equity Bank is completing the acquisition of 79% of Congo (DRC), the 7th largest bank – ProCredit Bank for w Africa. It has 170,000 customers and only about 4% of their 85 million citizens  have bank accounts.
  • The Mwalimu SACCO/Equatorial Commercial Bank combination is going to be called Spire Bank (via Mwirigi)
  • Fidelity Bank is set to receive an investment from Duet Private Equity who will pay Kshs 1.9 billion to buy into the bank (no shareholders are exiting).
  • I&M is set to acquire 100% of Giro bank in a deal in which the owners of Giro will get 5% of I&M. Also CDC is set to become the fourth largest owner of I&M after it agreed to fully buy out DEG and Proparco, who hold an 11%  stake. The Competition Authority of Kenya has authorized the acquisition  65% of Burbidge Capital by I&M.
  • Jamii Bora is looking to raise an additional Kshs 3.8 billion, comprising 800 million of debt and Kshs 3 billion from a strategic partner/investor.
  • Kenya Government: The National Bank of Kenya (NBK), Consolidated Bank and the Development Bank of Kenya will be consolidated into one or two institutions to make them stronger in coming months,  to make them stronger, Treasury secretary Henry Rotich has said.
  • The Kenya government also plans to create Biashara Bank form merging the Youth, Women’s & Uwezo enterprise funds) to cater for start-ups
  • Tanzania’s Bank M is set to acquire Kenya’s Oriental Commercial Bank, and be listed at the NSE. Bank M, a recent winner of best corporate bank in Tanzania has set up a holding company in Kenya (via Kenyanwalstreet)

Beauty & Pharma

  • The Competition Authority authorized the acquisition of 100% of Canon Chemicals by Godrej East Africa Holdings
  • Earlier the Competition Authority cleared the acquisition of the brands of Sigoria t/a Beuty Plus East Africa by Flame Tree Africa – this was part of the acquisition of the ‘Suzie Beauty’ brand and inventories for Kshs  45 million.

Food & Beverage

  • Centum made an offer to buy shares from some minority Almasi bottling shareholders.
  • The Competition Authority authorized the acquisition of Sab Miller by Anheuser-Busch Inbev.
  • Naked Pizza Kenya has been bought out by Pizza Hut (more here)
  • Coca-Cola Company  announced a new streamlined international structure. The company will form a Europe, Middle East and Africa (EMEA) Group, consisting of the business units that currently make up the Europe and the Eurasia and Africa Groups. And, in Africa, two business units will be reconfigured to more closely align operations with bottling operations on the continent, with the formation of a new South and East Africa business unit and a West Africa business unit. (Edit)

Finance, Law, & Insurance

  • Helios did a deal for Crown Agents key units marking the first time an African-managed fund acquired a UK financial institution.
  • Ringier Africa Deals group (ex-Rupu) acquired Nigerian online shopping platform DealDey
  • The Competition Authority authorized the acquisition of an additional 16% of AON Kenya Insurance Brokers Limited by AON UK Holdings  giving it a controlling interest of 56%.
  • The Competition Authority authorized the acquisition of 63% of First Assurance Company by First Assurance Holdings  on condition that the merged entity shall retain all 120 employees of First Assurance Company
  • Resolution Insurance was set to raise Kshs 2.5 billion in a series of transactions that will see new investors join private equity firm Leapfrog Investments in the list of the company’s shareholders (via Biz. Daily)
  • Two of the oldest Kenyan law firms, Daly & Figgis (1899) and Inamdar & Inamdar (1926) will now practice as Daly & Inamdar.
  • Plum LLP plans to buy a 23% of insurer British-American Investments(Britam) that had been seized by the government of Mauritius from a disgraced businessman in 2015. (Edit)

Logistics, Engineering, & Agri-Biz

  • Google agreed to buy a 12.5% stake in Africa’s largest wind project, Kenya’s Lake Turkana, from Danish wind turbine manufacturer Vestas Wind Systems A/S. The 310-megawatt Lake Turkana wind park, controlled by Lake Turkana Wind Power, is set to produce about 15% of Kenya’s electricity needs (via Marketwatch)
  • The Competition Authority authorized the acquisition  of 100% of  Schreurs Naivasha by Kongoni River Farm.
  • The  Competition Authority authorized the acquisition of 49% of, and or 100% preference shares in, Seruji Limited by QG African Infrastructure 1L.P.
  • The Competition Authority  authorized the acquisition of assets of Lima by Panafrican Equipment – (Biwott)
  • The Competition Authority authorized the acquisition of 51% Transmara Sugar by Sucriere Des Mascareignes
  • The Competition Authority  authorized the acquisition of the assets of Afro Plastics Kenya  by Ashut Engineers.
  • Finlays Horticulture Kenya  was granted approval by the Competition Authority to buy Skytrain Limited, which provides the essential service to cargo airlines at JKIA (via Biz. Daily)
  • Swiss logistics giant Panalpina completed the buyout of a majority stake in Nairobi-based air freight forwarder Airflo for an undisclosed amount. (via Biz. Daily)
  • Craft Silicon will launch the Little Drivers service starting with 2,000 drivers — formerly of Easy Taxi, which exited the Kenyan and African markets last month after a decision by one of its investors, American firm Goldman Sachs, to direct all its investments towards Uber. (via Biz. Daily)
  • A British engineering firm that designed the iconic Burj Al Arab hotel in Dubai has acquired a Kenyan company, making Nairobi its African headquarters for property, energy and infrastructure deals. Atkins will build on the strong regional market presence of Howard Humphreys East Africa to grow its consultancy business lines including design, engineering and project management. (via Biz. Daily)
  • TransCentury Group reached a settlement with its majority convertible bondholders, reducing the debt from $80M to $40M as the company has secured an equity injection of $20M from Kuramo Capital, bringing the outstanding bond debt to USD 20M. (Edit)

Real Estate & Supermarkets 

  • The Competition Authority  authorized the acquisition of 100% of Vipingo Estate  by Centum Investments.
  • The Competition Authority  authorized the  acquisition of a further 40% of Two Rivers Lifestyle Centre  by OMP Africa Investment Company (Old Mutual.) Also at Two Rivers,  Carrefour has signed a 7-year lease that  guarantees some exclusivity.
  • The  Competition Authority authorized the acquisition of  Yako Supermarket by  Nakumatt Holdings, on condition that the merged entity shall retain all two hundred and eighty three (283) employees of Yako Supermarkets.
  • Suppliers adopted Uchumi’s revival plan that included convert half of the debt owed to them into equity but Uchumi’s largest shareholder,  Jamii Bora Bank, said they were duped in investing in the chain two years ago.
  • Botswana supermarket chain Choppies finally succeeded in its quest to enter Kenya’s retail space through the acquisition of Ukwala

Telecommunications, Media & Publishing

  • The Competition Authority authorized the acquisition of 70% of Telkom Kenya  by Jamhuri Holdings (Helios)
  • Times Media Group paid a lot for half of the Radio Africa Group, but it mostly went to settle their debt that was $11 million (via #JKL #thismanpike)
  • Centum increased its stake in Longhorn to 60% in a recent rights issue (it was 31% before).
  • Bamba TV and Standard Group signed a Kshs 300 million partnership that will see KTN acquire a 50%  stake in Lancia Digital Broadcasting, the trademark owner of Bamba TV. (via The Star) (Edit)
  • Trace TV acquires African VOD Service Buni.Tv which is one of the 3 largest VOD services in Africa alongside Iroko TV and Nasper’s Showmax (Edit)
  • Longhorn Publishers is set to acquire 74% Law Africa Publishing for an undisclosed price. (Edit)

Other

  • The Competition Authority authorized the acquisition of 30% of KEG Holdings by Africa Bovine.
  •  The Competition Authority  authorized the acquisition of 51% of Universal Corporation  by Strides Pharma (Cyprus)
  • The Competition Authority of Kenya authorized the acquisition of shares in Stellar Investment Holdings by Catalyst OCL Investment LLC , pursuant to the provisions of a convertible debt instrument.
  • Marriott International have rebranded Protea Hotels to capitalize on the travel aspirations of Africa’s growing middle class and the increased presence of international hotel brands in Africa. The brand is now officially Protea Hotels by Marriott (Edit)
  • GardaWorld acquires KK Security: The international protective service firm had added KK Security to its global hetwork which now includes 18 African countries, up from 11 before. (Edit)

Rumours

  • Tigo to buy out of Airtel Kenya?
  • Gossip blog Ghafla Kenya gets acquired by Ringier (via Techweez)

Industry Stuff

  • An investment banker’s worst nightmare .. buyers in $ billon deals didn’t use financial advisers 26% of the time.
  • African private-equity deals shrink to lowest level in three years as funds reach record closes?!
  • Africa private equity exits reach a nine-year high?!
  • UK business aviation feels that a Britain split from the European Union would be a very bad thing.
  • The African Development Bank is putting up a fund with $5 billion, specifically to incubate ideas from young Africans.

$1 = Kshs 100

Barclays Kenya is Not for Sale

Barclays Kenya had a media briefing in Nairobi today, at which CEO, Jeremy Awori,  explained the complex sale, next steps for the bank and addressed industry banking developments.

He explained that Barclays PLC would be de-consolidated in Barclays Africa –  gradually shedding off their ownership from 62% to about 20%, but that this would not affect Barclays Kenya, whose parent bank, board and decision-making were all done by Barclays Africa, based In South Africa. The Barclays Africa Group is in 12 countries including  Kenya, Uganda, Tanzania, Seychelles, Zambia, Ghana, Mauritius, Mozambique and Absa in South Africa (Absa). He also said that Barclays Egypt and Barclays Zimbabwe were directly owned by Barclays PLC – and that these were non-core assets that they PLC was trying to sell. 

In Kenya they are rolling out new strategies, doing stock-broking and agency banking in ways that’s are different from other banks. He was emphatic that Barclays Kenya was not for sale.  Barclays Africa had a value estimated at Kshs 500 – 600 billion, if it was even up for sale, and that no local bank had the muscle to buy it.

He said they had slower growth, than other banks in Kenya over the last few years but it was steady, and deliberate with an underlying intent to have a well-governed, and managed bank that was capitalized and with excellent liquidity. He also said that he did not Barclays Kenya buying other banks, even if they were distressed opportunities. Mergers, the world over rarely pay off for investors, and they would rather grow organically, wooing customers from other banks, instead of buying the customers through the banks.

He said what was happening with other banks recognizing losses was not unexpected; some banks had been growing at 30% and shrinking their provisions, when it was natural that provisions would grow along with loans.

$1 = Kshs 100