Category Archives: CBA

CBA Launches Loop Banking

#unbankyourself

The 54-year-old bank continued the journey it started in 2006 with mobile payments (when they helped design, test and support m-pesa) and extended in 2012 with the launch of m-shwari, with another new chapter today.

The launch of Loop extends the transformation of CBA to a digital bank. removed paper. Loop creates a virtual cycle, a digital financial service that combines payments, savings, insurance, credit – into one solution. The account can be opened on a phone app or website, with no paper forms to be filled. Features of the accounts are the Loop app, Loop store, and Loop card – and combined, these enable access to Loop products.

Account owners get access access loans and overdrafts, as well as savings, budget and networking tools to help them grow their net worth and meet their financial goals. The Loop app also helps them control and analyze their spending in support of their financial goals.

The primary target is 20 – 34-year-old entrepreneurs, followed by 35+-year-old established bank customers. One can open a Loop account right on the app or website, and there are six Loop centers (Sarit, in Nairobi CBD, Yaya, Buru Buru, Rongai, and Garden City)

In reading the terms and conditions (T&C’s):

  • Loop is an electronic-only account, and customers won’t get served at CBA branches. This is similar to M-shwari.
  • Agreeing to the T&C’s also grant the bank the right to access a user’s mobile money information from telco’s.
  • To get finance, loan insurance from CBA (from death & disability) is mandatory.
  • A debit card (not a credit card) is provided, which can be loaded, can be used to deposit and withdraw cash at an ATM.
  • Account holders can also sign up for CBA investment products that range from between 3 to 12 months.
  • Any disputes that can’t be settled with bank staff, can only go to mutual arbitration (not a court).

The launch had a nice panel discussion that highlighted the disconnect between bankers and entrepreneurs. 

Banks adjust mobile phone loans

Mobile banking has really come of age in the last few years. As Carol Musyoka wrote CBA has moved from about 64,000 accounts before M-Shwari to 12.9 million accounts as at December 2015 primarily due to this virtual platform (i.e. M-shwari) without any exponential growth in its branch expansion.

The ability to save and borrow money just by using a few clicks on your phone has been revolutionary. Over at Equity Bank, CEO James Mwangi talks about the application for loans that start at 1 am, with approval being done in a few hours and the loans being disbursed to borrowers phones at 5 a.m. – long before the bank branch doors open at 8 a.m.

The interest rate-capping bill (Njomo) which covers loans has been deemed to cover all bank loans, but this has seen different interpretations at the leading banks that offer dedicated phones banking services:

Apply and get a loan directly on our phone

Apply and get a loan directly on our phone

  • CBA: Have insisted that the 7.5% fee that they charge is not interest, but a facility fee. This has been the case since M-shwari launched back in 2012. The are said to have issued Kshs 40 billion by the end of 2015, and across the border, CBA has got 60,000 mobile bank customers in Uganda in just two months in partnership with MTN (MoKash)
  • Coop Bank: Disburse mobile salary advance loans at 1.16% and business loans at 1.2%. They don’t charge any facilitation fees and loan are payable in 1 to 3 months. (Simply sial *667# to apply for a  #CoopMobileLoan). Coop are reported to be processing about 1,300 loan applications a day up from 250 per day before the rate cap. (70% of its new loan applications this month were requests for refinancing of existing loans). In 2015, the service had 2.7 million users, and 183,000 loans were disbursed.
  • Equity: Adjusted all their loans, including credit cards and mobile  bank loans to 14.5% (Previously “Eazzy Loan” and “Eazzy Loan Plus” products had an interest rate of between 2% and 10% per month) . The loans are said tp have a 1% facilitation fee
  • KCB resumed lending their m-pesa loans after a three-week technical hitch. They have adjust loan rates to 1.16% with a one-off negotiation fee of 2.55% resulting in a total of 3.66%  (including government excise duty tax) on loans. The loan duration has also been reduced to just one month – with no more 3 or 6 month loans.

More and More

When Banks Pay Court Bail

CBA has been in the news as it was reported to have facilitated bail in an ongoing criminal case.  It’s not common to see a bank linked to a case.

CBA bail

CBA”s statement

The bank issued a statement to clarify that it was not a party to the case. It only issued a guarantee of Kshs 140 million to its customer which is a law firm, and it  is presumed that the law firm used that to arrange to release the accused person in the case.

Most of the time a court demands bail or bond in Kenya, it is usually presented as cash or vehicle logbooks or land title-deeds. It’s rare to have a bank guarantee. But the amount called for in this case is quite large, and it is doubtful that any of these regular items offered as bail would be arranged at short notice. The Kshs 140 million guarantee is equal to about $1.39 million or  £1.05 million.

UK news

News coverage of the case

Bank’s do offer several forms of guarantees mainly as trade finance or insurance products. The guarantee in this case ensures that the defendant will show up in court during the case. If not, then the bank will have to pay the court the amount on behalf of the law firm.

The case is being covered extensively in Kenya and UK media because of the defendant, a commodities trader whose firm was found to be moving a consignment that apparently contained illegal drugs.

$1 = Kshs 101 and .39 million or  £1 = Kshs 133 

 

When Bankers own Banks

Managers and employees are often given a chance to become part owners in the banks. This ‘aligns their interests’ with the institutions and gives them an added incentive to help the institutions do better as it individually rewards them for the good performance. The incentives are usually facilitated through employee share option schemes (ESOP’s) which convey some tax benefits and discounted buying prices. Typically, in conventional ESOP’s,  there a general pool for all employees and another for senior managers.

The method of calculation and award of these benefits is done in secrecy, usually by board committees. This is to ensure the privacy of employees and security of their families, but one outcome is that any revelation of these perks sparks a lot of interest.  In fact, you sometimes find a higher level of disclosure of compensation practices at listed banks in Uganda and Rwanda, than you do with Kenyan ones.

Stanbic Uganda compensation guide

Consider these examples:

CBA: Shareholders include a ESOP who own 2.5%.

Chase Bank: Employees of the bank own  4.3% of Chase through an ESOP. Elsewhere a bonus to the former chairman was one of the deals that the auditors queried in 2015.

Cooperative Bank: Stories about shares to bank management and directors first surfaced in 2008, ahead of the IPO in which bank staff got 9% of the shares. and has been on twitter this year. The company’s accounts show that the CEO owns 2% and the bank links the story to a smear by a former CEO who has an ongoing tax case with the bank.

Equity Bank: CEO owns 4%, while an employee ESOP owns about 3%.

Jamii Bora:  The CEO own 1% and is also an investor in the largest shareholder of the company.

Family Bank: In 2011, shareholders voted in an ESOP for managers and a transfer of 1 % transfer of shares of the (then-new CEO , which he purchased at a discount as part of his employment package.

Housing Finance: Has has an ESOP since 2006 that’s open to  all employees: Eligible employees pay for the units by cash at a price determined by Trustees either in full or by instalments until price is paid in full. The Unit holder is not allowed to sell, transfer or otherwise dispose of Units registered in his name to another Unit holder or to any third-party whatsoever.

KCB:  When KCB CEO Joshua Oigara declared his wealth (assets of Kshs 350 million comprising land, buildings, motor vehicle, cash bank balances and shares) and salary (with allowances that totaled  Kshs 4.9 Million a month),  last year his statement added that  “..My public declaration is driven by the need for us as private sector players to initiate greater transparency. Kenya is bleeding from corruption mainly driven by secrecy in organizational operations..”

$1 – Kshs 101.

Bank Capital Raising Season

Away from the Chase Bank saga, banks continue to raise money to support their fast growth in recent years. It’s a bit harder to raise money and it’s clear the Imperial Bank fallout affected other bond and stock offerings that came in its wake.

In the News

  • Family Bank has a rights issue coming up, to be approved by shareholders.
  • Duet Private Equity Limited, part of the Duet Group, will inject Ksh1.9 billion into Fidelity Commercial Bank to strengthen the Bank’s core capital, and support its local and regional growth strategy.
  • EDIT Jamii Bora Bank just raised $12 million through two Private Equity funds – Equator Capital Partners  (through its managed fund, ShoreCap II) and Progression Capital Africa  (through through its managed fund, Progression Eastern African Microfinance Equity Fund). 
  • KCB Group shareholders are to approve a rights issue and (another) name change to KCB Plc. KCB is also paying shareholders a Kshs 2 dividend, with Kshs 1 in cash, and the other Kshs 1 as a scrip dividend. The intent of this is to allow its Shareholders to derive value on account of higher dividend in future due to increased shareholding. This is automatic, but shareholders have the option to receive the Kshs 1 in cash by  filling and returning a scrip election form to the bank by June 17. If all shareholders opt for the scrip, and get new shares at a price of Kshs 38 per share, this will increase the number of KCB shares by 2.5%.
  • National Bank was expected to have a rights issues in 1Q2016, and the government expected to raise Kshs 4.99 billion from a the issue in February 2016. The process has been delayed and it now appears that NBK may still be combined with two other smaller state-controlled banks –  Consolidated Bank and the Development Bank of Kenya.
  • Sidian Bank (formerly K-Rep), is expecting its minority shareholders to  provide Kshs 400 million capital to support its growth plans.The new capital comes after the majority shareholder, Centum Investment, injected its share of Kshs 1.2 billion last year after raising its stake in the lender to 67.5%.. Sidian chief executive officer Titus Karanja said  “They gave us their commitments and we are expecting the money by end of May.”
  • SMEP Microfinance Bank shareholders are expected to have a rights issue to increase their  share capital, issue a bonus (1 for every 6 held), and also create an employee share option program (ESOP). They  will target less than 100 people or institutions for the privately placed capital raising.
  • EDIT Credit Bank expects that Fountain Enterprises Programme (FEP Holdings) will pay Kshs 5.4 billion for an additional 70% stake in the bank..via a private offer priced at Kshs180 apiece and limited to members of the chama (investment club) which has a large following in the UK and US.

Away from right issues, some banks have recently signed funding deals:

  • CfC Stanbic Bank signed a $135 milllion dual tranche term loan facility in which Emirates NBD Capital Limited (ENBD) and Mashreqbank PSC were the Initial Mandated Lead Arrangers and Bookrunners of the financing. The financing, which will be used for general corporate purposes, including, trade-related finance, was oversubscribed from the initial launch amount of US$ 100,000,000.
  • Commercial Bank of Africa (CBA) and Standard Bank of Southern Africa (SBSA) executed a $25 million cross-currency repo transaction.  The deal, facilitated and guaranteed by Frontclear, is a first of its kind transaction and paves the way to a more robust, stable and inclusive interbank market in Kenya. In the transaction, CBA receives $25 million in 1-year funding from SBSA and provides Government of Kenya Bonds as collateral.
  •  The African Development Bank (AfDB) recently extended a $40 million, 10-year line of credit to the East African Development Bank (EADB) towards support of regional infrastructure, manufacturing, agribusiness and education sectors with a bid to increase economic and government revenue growth in the member countries.
Not forgetting Chase Bank:
  • The Chase Bank bond that was oversubscribed last year was suspended. The bank had also undertaken a private placement in which high net worth investors bought shares at Kshs 2,760 each. Chase Bank had said that proceeds of the private offer would be used to shore up the lender’s thinning capital ratios, grow the loan book and invest in technology.

What other bank rights issues are there?

 $1 = Kshs 102.