Category Archives: Charterhouse

2006 Kenya banking review


still Barclays country

based on reported figures for September 2006

1. Barclays Bank of Kenya [assets worth 117.17 billion shillings ($1.67 billion)] In 2006 Barclays made a major policy about turn and announced expansion plans including reopening branches they had closed a few years ago. They also venture into Shariah compliant banking as did KCB, I&M, Dubai and K-Rep banks.

Compared to September 2005, assets were up 10%, deposits 12%, loans 14% but income was up only 6%. They also increased their investment in government securities to about 40% of the loan book. Still despite being Kenya’s largest bank, it also has the 2nd highest return on assets at 4.16% (second only to Equity Bank at 4.74%)Barclays shareholders had a very happy year, which saw them earn a bonus share and a share split in addition to their usual top dividend.

2. Kenya Commercial Bank [84.92 billion] KCB nudged passed Stanchart in assets while its share price zoomed passed though Stanchart still has a higher market cap and better returns. KCB’s expansive rural branch network was the envy of other banks such as Barclays and it also expanded into Sudan in 2006. KCB’s assets were up 18%, deposits 17%, loan 13% while income was up 26% from a year ago

3. Standard Chartered [84.09 billion] The bank launched several new products including accounts aimed as women (Diva) and children and adult savings (Safari) accounts. Stanchart also appointed a new MD – Mr. Etemesi. Assets up 18% deposits 16% loan s22% and income 10% while it also increased its investment in government securities

4. Cooperative Bank [55.17 billion] Co-op’s strong recovery continued and it remains a strong candidate for a listing in the next two years. One of their unique traditional products – kids’ savings accounts – was invaded by other banks this year. Compared to last September, assets were up 12%, deposits up 18%, income up 19%, but loans down by 16%. Also their total non performing assets (NPA’s) doubled to 17 billion while the bank also tripled its in investment in government securities during the year.

5. National Bank of Kenya [39.37 billion] NBK is yet to have its capital and debt restructuring done even though it is promised every year by the Government and despite reporting profits each quarter, it was not able to pay any dividends. The Bank launched a low fee (Taifa) account to counter the crowds flocking to Equity and Co-op banks. Assets and loan were up 10%, deposits and income up 16% and it tripled investment in government securities but NPA have also doubled to from a year ago.

6. Citibank Kenya [35.43 billion] Assets up 12% loans up 42% and income up 33%. Was a late entrant to the share craze providing advisory services to the Mumias rights issue in November.

7. Commercial Bank of Africa [35.12 billion] CBA opened a new headquarters and is expected to venture into stockbroking. Assets, deposits, loans, and income were all up 21% but NPA also up 45% from a year ago.

8. CFC [25.04 billion] Had a successful rights issue to raise capital and also continued to roll out new insurance products. Its stockbroking unit is the largest in the country and was reported to have processed Eveready applications amounts that exceeded the shares being offered. CFC doubled its investment in government securities, assets were up 35%, deposits and loans up 20%, income up 61% but NPA were also up by 74% from the year before.

9. NIC [23.55] Still the leader in asset finance while their flat fee (MOVE) was imitated by other banks. Assets and deposits were up 18%, loans 15%, and income 33%, but NPA’s doubled from a year ago also. Shareholders finally enjoyed some significant price appreciation after being stuck at 50 /= forever.

10. Standard Bank (Stanbic) [23.29 billion] Many Kenyans bought shares in their Ugandan subsidiary while the Bank has expressed an interest in investing in NBK once it is restructured. Stanbic which has the lowest NPA (followed by Citibank and D-Trust) had assets up 54% deposits and loans up 44% and income was up 49%.

11 Investment & Mortgages [21.79 billion] I&M had assets up 25% deposits 27% loans 36% and income up 33% as the bank made a push into the credit card sector.

12 Diamond Trust [19.14 billion] Raised capital in an over-subscribed rights issue in December and is rumored to consolidate with a sister bank next year. Assets were up 27% deposits 29% loans 25% while income was up 33% from a year ago.

13 Equity [16.33 billion] Kenya’s s fastest growing bank had assets up 63% deposits 81% loans 105% and income 90% however expenses in Q3 grew faster than income and NPA’s are up 165%. It has the highest returns (assets 5% and equity 46%) and successfully listed all their shares on the NSE in 2006

14 Bank of Baroda [11.43 billion] Assets and deposits up 29%, loans up 27%, income up 22% and profit could double this year.

15 Housing Finance [9.8 billion] Has a new MD while its share price appreciated beyond expectation leaving it with the highest P/E on the NSE. Assets, deposits, loans, income, and expenses remained basically unchanged from a year ago while the bank has converted cash into government securities. The lack of new loan growth resulted in NPA’s forming a greater portion (72%) of loan book.

16 Prime Bank [9.26 billion] Assets and income up 40%, deposits 43% loan 29% and profits are up 69% from a year ago.

17 EABS Bank [8.55 billion] Teething pains continue as assets shrunk by 4% but with a positive outlook as income increased twice as fast as operating expenses this year, but still NPA’s are at 72%.

18 Imperial [8.47 billion] Assets up 5% loan 146% and securities up 60% as the bank had redeployed about 1 billion in placements. Income is up 13% and Imperial has among the top 5 returns (even better than Citibank)

19 Bank of India [8.15 billion] Assets and deposits up 20%, loans up 56%, income up 46% but NPA up 43% – still the bank is on track for a huge profit this year.

20 Bank of Africa [6.23 billion] Expects to open another Nairobi branch and but into a bank in Uganda to go with the one it invested into in Tanzania. Assets up 17% deposits 35% loans 16% and income up 31% and despite increase expansion costs remains on track to achieve a profit this year.

21 Fina [6.15 billion] One of the banks that has championed SME financing and also has an extensive operation in Rwanda. Assets unchanged from a year ago while loans up 17% profits will be 41% higher, but NPA also up 59%.

22 Habib AG Zurich [5.07 billion] Asset up 9%, loans 16% and income up 11% at this bank which invests primarily in government securities.

23 ABC [4.95 billion] Assets up 7% with loans up 4%, and income up 20% from a year ago however NPA’s also up 46%.

24 Giro [4.93 billion] Nothing much heard from partnership with SBI (India) and
Assets were up 3%, income up 9%, but loans down 13% and profit will be less than 2005.

25 Guardian [4.66 billion] Assets up 2%, and bank has upped its investment in government securities by 61% compared to 2% growth in loans – however NPA up 216% .

26 K-Rep [4.52 billion] One of the banks that pioneered the micro-finance sector now finds itself being crowded out by new entrants advertising all manner of SME packages. It will administer an ADB guaranteed line of credit for women entrepreneurs (along with CFC and CBA). Assets up 31,% deposits 59& and income up 50% proving that micro finance is low risk niche with only 4% NPA’s even as loans by K-Rep increased by 40%.

28 Southern Credit [4.27 billion] Assets up 1% deposits up 6% and loans 9% but with NPA’s up 52% from a year ago at the bank with a major credit card arm.

29 Victoria [4.19 billion] Assets and deposits up 8% and the bank has reduced its NPA’s by 49% and now has the lowest NPA in the country at 1% with 1 billion shilling in the bank.

30 Charterhouse [3.94 billion] The bank was placed under statutory management following money laundering and tax evasion allegations and has fought back through the courts and the press (& with some questionable tactics). Even as depositors are locked out, assets up 19% but profits down 33% and the CBK manager increased investments in government securities – up by 332% (as directed by the law)

31 Equatorial [3.67 billion] A Sameer bank had assets up 1% but reduced government securities by 72% to increase loans by 22% but NPA also up 75%.

32 Middle East [3.45 billion] Assets up 1%, loans up 45%, but deposits down 10% yet bank may increase its profit as a result of an improved NPA positions.

33 Consolidated [3.45 billion] Assets up 29%, deposits & loans up 33% and despite high NPA it may achieve a profit in 2006. The Deposit protection fund is expected to sell its 50% stake in the bank, but without a profitable track record it will remain private.

34 Chase [3.29 billion] Assets up 33%, deposit 53%, loans & income up 43% but NPA also up 42%.

35 Development Bank of Kenya [3.05 billion] Assets up 20%, deposits & loans are up 50% but NPA up 52%.

36 Habib Bank [3.02 billion] Assets, deposit, and loans, all up 4% this year at Habib which is rumored to consolidate with sister bank in 2007. Has the highest ratio of investment in government securities.

37 Credit [2.77 billion] Assets down 6% and NPA up 125% as the bank drops 3 places in rankings.

38 Transnational [2.44 billion] Assets up 12%, while deposits & loans up 20% from a year ago but NPA also up 73%.

39 Fidelity [2.11 billion] Income up 50% while deposits & loans both up 35% from a year ago.

40 Paramount Universal [2.05 billion] Assets up 55%, deposits up 72% but income is flat and NPA’s are significantly up.

41 Oriental (formerly Delphis) [1.37 billion] Losses continue to eat into assets. Growth in income finally faster than growth in expenses but not enough to reverse wipe out of gains in the 1st half of the year as the bank moves further away from profitability and drops behind Paramount in size.

42 Dubai [1.22 billion] One of the first banks to recognize the potential of having a branch in the Eastleigh area now finds itself fighting with new entrants (giants Barclays and KCB) invading the area. Assets up 5%, loans up 12%, deposits up 15%, but NPA up 130% from a year ago.

43 City Finance [0.53 billion] Smallest bank with deposits up 34% (to 130 million), but income down 31% and NPA up 40% from a year ago.

Other institutions
Would be ranked 27Family Finance [4.47 billion in assets] Almost as fast growing as Equity with a similarly ambitious expansion plan, but was not able to become a bank since their planned conversion was put on hold by Central Bank. A share capital share of 390 million is more than other existing banks, but new banks are expected to be stronger and so the society went for a controversial private placement which was under-subscribed in November 2006. Assets and profits are up 40% from a year ago while deposits are up 50%.

new bankGulf African Will be the first 100% Shariah bank in Kenya

Diamond Trust EGM

Diamond Trust Bank will have an extraordinary general meeting (EGM) on December 21. The company has not amended its articles of association since 1982 and want to update them to reflect new capital structures, governance, CDS and the electronic age, among others.

Jubilee Insurance will have an EGM on December 18

The various proposed amendments will have outcomes including:

New capital: Creation of preference shares and also clears way for a share split
– Shareholders who don’t approve of company actions can have their shares forfeited. E.g. minority Serena shareholders who did not approve the conversion to TPSEA
Modern technology: Allows notices and other documents to be e-mailed to shareholders. (This can save costs; i.e. the company has 10,000 shareholders and budgeted Kshs. 7 million for printing and postage of the ongoing rights document). . Also allows board meetings to be held by teleconference or video conference, allows dividends to be paid by electronic means (e.g. bank transfer, direct debit) not just by cheque and notices can be sent to shareholders outside Kenya
Super shareholders? New articles recognize that 10 members constitute a meeting and allows any director or any 2 members to convene an EGM. The company’s top 10 shareholders own 48% of the company while the next 50 own another 10%
– Governance: recognizes that directors not disallowed from doing business with company provided they disclose this to fellow directors and also don’t vote on such issues. Also fellow directors may remove a director who misses 3 meetings.
– Cap on underwriting commissions at 10%. (Another cost saving measure since the on-going rights issue has budgeted placing commissions estimated at 28%.) . Also stockbrokers may be paid in the form of shares.
– Makes provisions that stem from the 2006 budget speech where the Finance Minister proposed that any dividends unclaimed after 7 years be returned to the CMA’s investor compensation fund from where individuals can claim when they resurface.
– Bankrupt person may vote by proxy

Charterhouse depositors cry foul
Charterhouse Bank and depositors are asking (in a full page newspaper notice last week) why was their bank, with no liquidity problems, shut down without sufficient explanation and why they are still denied access to their funds almost six months later even after a court had lifted the order? The accounts of the bank remain intact and they are still earning interest on the almost Kshs. 3.1 billion in deposits there as the statutory manager has invested surplus funds in government securities. Only staff costs have shot up reflecting the additional managers deployed from the central bank.

Just another Monday meeting

Go for a policy meeting with the head of the group at his office. The meeting is supposed to start at 9 a.m. but it’s always good to expect a slight delay and I carry a book to read. Good idea because the meeting is not going to start on time as the group director (GD) is running late.

So we introduce ourselves to each other sit and while the time away. At least I have a book to read, others flip though newspapers they have wisely carried. The agenda for the meeting dubbed project green is also circulated.

A half hour later, the GD’s assistant commences the meeting as we wait for his boss to arrive.

When it’s time for one divisional director to speak, his comments are almost a full five minutes speech – as is typical of one who is never told when he has said too much. Fortunately I have sat facing the window and I look outside and allow my mind to wander. Hmm, Yaya Center is a straight line from town, yet looking at valley road, it shoots off 60 degrees to the far to hurlingam, and then one must cut back anotehr 60 degrees to the right on Argwins Kodhek road – making a perfect triangle to get to Yaya which is a straight line from town. I wonder why they the road is not a straight line from town. Oh, yeah, they probably had to go round DOD where they used to have great nyama choma long before buffet opened.

Back to the present. The meeting is going on, but has also taken a sharp, new turn. We have been brought here to endorse the green strategy, but the mood in the room is for a slightly yellow one. Then one director, take his turn and says “the strategy should be red, in fact, an angry red as green is a misplaced perception only useful for PR purposes. He goes on to argue that angry red is what we should be our collective position. He has valid points and other participants in the room, slowly warm to his idea. Red red, red. . . ”

The assistant to the group director is in obvious discomfort at the unexpected revolt. He reaches out to what are expected to be friendly allies in the room, but except for one, they are also endorsing red. Red is the future, red is the right thing to do.

Red, aka the divisional director, knows to quit when he’s ahead. The meeting has started late and he has another function to attend. He goes over to whisper his apologies to the assistant, for his early departure, and perhaps for leaving the asssistant with a time bomb for his boss. He then proceeds to exit.

But as he opens the door, he is bumped by a tea cart. It’s tea time. Tea was supposed to be served at the meeting. And tea can only be served when the group director is present! Sure enough, behind the tea ladies is another beaming assistant announcing that the group director’s (GD) arrival is imminent. The assistant in charge asks Red to sit in for a few more minutes, which Red does.

Sure enough a minute later, the GD enters an hour and a half after the meeting was supposed to start. He sits down and apologises for his previous meeting which over-extended.

He grabs his copy of the agenda and proceeds to review the green strategy. He assigns divisional directors responsibilities and asks them to do “A B C” by dates “D E F,” which they willingly line up to do. He is charming and confident, sorting out problems in scheduling and financing of Green with directives to different people as his assistant beams at his side at the salvation which has now arrived.

Red has his head down. He cannot believe that we have all abandoned him, and no one will speak up to update the GD that the room had unanimously voted RED while he was caught in traffic. But the room now sings and echoes to the green green green tune. Red remains mum except when he is assigned a key part of the green project which he meekly accepts. If he had left a minute sooner he would have secured his victory.

Surprisingly he does not choke on his tea and biscuit, but he’ll be probably too full to eat lunch. Just another Monday meeting…

BoA expands
Bank of Africa (BoA) Kenya and its partners have acquired a controlling stake in Allied bank of Uganda. BoA has also applied to expand its banking operations into Tanzania.

Charterhouse update
The Standard unearths tales of insider lending at Charterhouse, which are however still in the mid-range of many banks in the 40 – 60% (of share capita) range and well below NBK at 600%.

Charterhouse still closed

Branches of Charterhouse Bank remain closed today to customers despite a vague order given by an Eldoret Court was followed by jubilant employees of the Bank (dancing on TV) promising that it was only a matter of time before the bank resumed operations.

CBK’s argument that money laundering was the reason for placing Charterhouse under statutory management was never strong and whether any laws were broken remains in doubt. Charterhouse was not a bank in danger of collapse and has fought the order from day one. The bank had 3.1 billion shillings in deposits, loans of 2.7b and even reported a 76 million profit in the half year to June before it got embroiled in the Nakumatt tax evasion furore.

Money laundering is closely linked to tax evasion and KRA has been pressing banks to scrutinise customer transactions for suspicious activity while international authorities have also been urging banks to monitor for terrorist related funding/transactions.

Smaller banks seem to be the preferred choice for many business people as they allow greater flexibility and accommodations including late deposits, high interest rates on deposits, and unauthorized temporary overdrafts.

Mid-week Business

International takeover
The Linde Group, (Germany) has applied to takeover the BOC Group (UK) which owns 65% of BOC Kenya – and who are in the process of acquiring Carbacid Kenya. Both local company shares remain suspended on the NSE and BOC Kenya managers’ don’t expect this new deal to affect the Carbacid takeover which is yet to be approved by the CMA.

Nosy bankers
– The Judge at the corruption trial of former Central Bank Governor, Andrew Mullei has refused to allow Charterhouse Bank lawyers to cross-examine witnesses.

Kenya Commercial Bank has thwarted efforts by the City Council to set up a public toilet on Aga Khan walk, opposite Kencom House.

Sometimes, Government is a good shareholder
Kenya has blocked Ethiopian Airlines from operating daily flights on the Entebbe-Nairobi route. The move could however trigger a backlash since it’s only a matter of time before other African counties, envious of KQ, and desiring to revive/support their airlines, retaliate with their own trade blockades.

Madaraka
The high court has indefinitely extended the period for Madaraka residents to obtain financing to purchase their houses.

Equity No. 1
Equity, is the first bank to report quarterly results as at 30 June 2006 and they have come out just in time for their shares to list on the NSE on August 7. On Monday, the Bank announced some amazing numbers. From a year ago (June 2005) assets are up 55%, pre tax profit is up 115%, deposits are up 67% while loans are up 130%. Good Buy, on August 7? Maybe!

All VoIP
All the three major phone companies in Kenya are now offering VoIP for international calls.
A comparison of call costs to the USA;
Telkom 888 15/= per minute ($0.2)
Celtel 123 29/= ($0.39)
Safaricom 888 30/= ($0.4)

Restricted News
The Daily Nation has joined the East African Standard and now restricted the magazine section articles on their website to premium subscribers only (One month costs $10 while annual cost is $ 60)

Kuku Cars
Cool true story on converting a Volkswagen Jetta to run on cooking oil and achieve 600 miles a gallon! Wouldn’t it be cool if someone started converting our local Toyota’s so that a taxi driver could buy chips, from Kenchic and then squeeze out the oil to put in his fuel tank?

Oil & Gold
Gold: encouraging results from Migori
Oil: High potential deposits in Lamu.