Category Archives: Barclays

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.

7th BAFM – Building African Financial Markets – Day Two

Summary of day one of the BAFM.  

The second day of the 7th BAFM – Building African Financial Markets seminar continued with more explanations on changes in the global scene and how they could affect African exchanges.

Michele Carlsson of Nasdaq said immediate top compliance concerns were the need to fully understanding regulations and how they affect exchanges, and the inability of technology to meet current market requirements. She said it was important for exchanges to have market surveillance systems that could look at several assets classes, do powerful visualizations, have flexible alerting, and enable real-time controls as well as being scalable and resilient.

Anne Clayton of the Johannesburg Stock Exchange spoke on the impact that various new European Union regulations that could have on African capital markets. These include rules on general data protection (GDPR, May 2018), benchmark regulation (BMR – Jan 2018), financial instruments regulations (MiFID II –  Jan 2018) and others on derivatives trading. She explained that data on GDPR, EU citizens had to be notified of data breaches and they also the right to be forgotten if they requested it i.e. to have all their data wiped out from a system  – .but that is in conflict with “know your customer” (KYC) and “anti-money laundering” (AML) laws, which require that financial data, is kept for seven years.  African exchanges have low liquidity and the costs of compliance keep going up, now estimated at 5-10% of turnover, even where there is no uptake of products or use of some of the new rules. Many of them have low liquidity and are heavily dependent on foreign investors to provide liquidity, but such investors are sensitive to any policy or taxes which can make them shift to other markets. But non-compliance could result in heavy penalties for companies.

Dr. Anthony Miller spoke of new opportunities from linking exchanges to the United Nations Sustainable Development Goals (SDGs) through new products. Last week Fiji launched a green bond at the London Stock Exchange while there was a gender bond floated in Asia to support women funded entrepreneurs. This is at a time that companies like Bloomberg are tracking the growth of green funds around the world, while many other investors are eliminating carbon investments, like coal, from their portfolios.

Block chain and bitcoin were top topics of discussion on day two of the BAFM. One talk was an explanation on the different aspects of block chain technology, which could offer African institutions the ability for Africa to leapfrog old hurdles. Sofie Blakstad spoke of using block chain to provide cheaper rural financing that is much cheaper than from commercial banks, and that the technology also enabled an unprecedented level of validation of the impacts of targeted funding programs such as micro-finance institutions  e.g. how ethical or green their funding programs are, by looking at data from the beneficiaries.

(Away from the BAFM, on the same day, Juliani, a popular Kenyan gospel musician launched Juliani “Hela” a loyalty point-based currency earned by customers on every purchase of an official Juliani event ticket, a T-shirt, or album).

David Wagemma spoke about M-Akiba which was the first mobile-traded government bond in the world that cost Kenyan investors just $30 and which took five minutes to sign up and pay for, all via their mobile phones.

Later in a panel on block-chain as a disruptive technology for markets, Abubakar Mayanja said that progressive regulators should have sandbox licensing so that regulation goes on even as new ideas are developed, while Reggie Middleton, said the 1,500 cryptocurrencies in existence could grow on their own without needing each other and they did not need to concern central bankers and regulators in Africa as they had nothing to do with currencies.

In their remarks to close the event, Geoffrey Odundo, CEO of the Nairobi Securities Exchange (NSE), thanked organizers, saying that the BAFM had trended for two days and he saw that even the Deputy President was still following the conversation, while Oscar Onyema, President of African Securities Exchanges Association (ASEA)  said that this had been the best event in the BAFM series, with the next one to be hosted by the BRVM in Ivory Coast in April 2019 – who would be challenged to excel of the Nairobi event

Day two of the 7th Building African Financial Markets seminar was held at the Villa Rosa Kempinski Hotel in Nairobi Kenya on April 20, 2018.

7th BAFM – Building African Financial Markets – Day One

The 7th BAFM – Building African Financial Markets seminar was officially opened by Kenya’s Deputy President William Ruto with a joke that it was important that the organizers, who were the African Securities Exchange Association with the Nairobi Securities Exchange go out and clarify the difference “stock exchanges” and “stock theft” which is a big menace in Kenya. He then mentioned that securities exchanges provided assets protection and wealth creation and that some companies that the government had divested from like Kengen, Safaricom, and KCB were now among the leading institutions in Africa.

He asked the capital markets to help revive the agricultural sector and urged them to work on a commodities exchange and use block chain to create a ledger for collateral, and that he hoped the summit would redirect shareholders attention to the opportunities that reward vigilant, flexible and innovative investors.

One of the highlights of the day was a talk by Terry Adembesa who explained the complex processes and long steps that the Nairobi Securities Exchange has to go through to introduce new products and to persuade companies to list on the exchange. He explained how they had passed regulations to allow derivatives trading and short selling (which they plan to introduce later in 2018 for selected equities_ and to also allow market making by selected firms for stocks and bonds. They had made strides get pension and insurance funds to recognize their new products like Real Estate Investment Trust’s (REIT’s) and lobbied alongside Barclays to get Exchanged Traded Funds as an accepted class of equities that local funds could buy into. They had also lobbied the Kenya Revenue Authority to waive taxes on development REIT’s.

He added that African exchanges like Kenya’s have low volumes compared to Johannesburg and Mauritius; they mainly trade equities, with low participation from local investors (Trading at the Nairobi Exchange is 35% by local investors compared to 100% in many Asian markets) and later this meshed well with a nice presentation on the African Financial Markets Index by George Asante of Barclays Africa. It was a nice illustration of the maturity levels of stock exchanges in 17 countries that constitute 60% of GDP of Africa, with a startling finding that there was a significant cost borne by African countries by them not having effective capital markets.

Sallianne Taylor explained how Bloomberg  collects data and showcases African companies and exchanges to the wider world, facilitating financial leaders and exchanges to meet investors and financial journalists, while Nora Owako traced the evolution of Safaricom’s M-Pesa which has changed over the years to match the needs of consumers and now encompasses international remittances, savings, loans, utility payments, and merchant finance.

Another striking revelation was by David Waithaka of Cellulant during one of the afternoon panels on fintech as an enabler. The company, which was founded in Kenya, had run a platform in Nigeria that had connected 15 million farmers to 6,000 agro-dealers for farmers to get inputs and with commercial banks providing bridging finance to agro-dealers as they awaited reimbursements from the government. The program had a redemption rate of 59% and through it, farmer incomes improved from $700 to $1,800. It was later extended to rice and saw $2.4 million worth of commodity trades in two months. It is being rolled out in Liberia and event participants asked” Why not Kenya?”!

One of the shocks of the first day of the BAFM was from Joseph Tegbe of KPMG Nigeria who gave a talk on cybersecurity and warned that there was a real possibility that countries could use cyber attacks to target and destabilize the stock exchanges of other countries.

NSE Chairman Samuel Kimani thanked the BAFM gold sponsors – Bloomberg and Barclays, silver ones – CMA Kenya, Safaricom, Kengen, EFG Hermes, and others. The day ended with news during a panel on fintech as an enabler, that Barclays launched a green mortgage product, offering cheaper financing for energy-efficient homes

Day one of the 7th BAFM – Building African Financial Markets seminar was held at the Villa Rosa Kempinski Hotel in Nairobi Kenya on April 19, 2018. 

Nairobi hosts the 7th BAFM – Building African Financial Markets seminar

This week sees Nairobi host the 7th Building African Financial Markets (BAFM) seminar with the theme of “adaptive innovation as a lever for growth and sustainable development of financial markets”. 

News of the seminar was unveiled by Nairobi Securities Exchange (NSE) CEO, Geoffrey Odundo in January 2018 when Barclays launched its Africa Financial Markets Index (AFMI) report in Nairobi. The Barclays AFMI measured African stock exchanges by six pillars of market depth, access to foreign exchange, market transparency, macro-opportunity, enforceability of agreements and capacity of local investors, and it ranked South Africa on top, with Kenya in fifth place.

The NSE and the African Securities Exchanges Association are organizers of the BAFM event with  Bloomberg and Barclays as gold sponsors. The ASEA, which was founded in 1993 with the Nairobi Stock Exchange as the first member, now has a membership of 40 African stock exchanges.

The BAFM will be officially opened by William Ruto, the Deputy President of the Republic of Kenya. It will feature leaders and speakers from organizations such as Nasdaq, the Johannesburg Stock Exchange, EFG-Hermes – a Cairo-based investment bank that is new to Nairobi, and Safaricom, while some of the sessions of great interest are likely to include “a blueprint for orderly markets in Africa”, M-Akiba; the $30 mobile-phone government bond as a disruptive technology reshaping African financial markets, “building new markets in frontier economies”, a guide for managing cyber risk, linking African exchanges organically, and “is blockchain the future of finance or a flash in the pan?”.

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.