Category Archives: Co-op

Kenya’s Top 10 Banks in 2020

Factoring in the absorption of their new NBK subsidiary, KCB’s numbers increased their lead at the top of Kenya’s bank table, with assets of Kshs 786 billion (~$7.86 billion). They are followed by Equity (Kshs 507 billion assets), which also increased its capital by almost Kshs 30 billion – probably muscle for its regional deals.

The only major change is with NCBA entering the top 3, after the assets and liabilities of NIC were transferred into CBA in October 2019. NCBA had bank assets of Kshs 465 billion and a pre-tax profit of Kshs 9.2 billion that was further reduced by exceptional merger costs of Kshs 1.1 billion.

The financial statements published today are a continuation of CBA’s and they show that timing of the transfer resulted in a “bargain purchase gain” of Kshs 4.1 billion.

Cooperative Bank is fourth (Kshs 449 billion assets), but may overhaul NCBA by the end the year, while fifth is Absa Kenya whose 2019 results were announced yesterday.

An interesting race mix is next with Standard Chartered, Stanbic Bank and Diamond Trust all closely bunched at about Kshs 300 billion of assets, and rounding out the top ten are I&M and Baroda Bank.

The year 2020 has started with a lot of economic uncertainty economic caused by the Corona virus pandemic with the possibility of strain at some banks. At their results briefing yesterday, Absa Kenya CEO Jeremy Awori said that such times also create opportunities for new partnerships as Absa’s growth plans include targeted acquisitions and disposals. Already Jamii Bora and Cooperative banks are in discussions about a buyout, while there are other small banks that were already in need of a boost.

Comparative Rankings (to last year):
1 (1 + 12) KCB. (+NBK)
2 (2) Equity.
3 (8 + 10) NCBA.
4 (3) Co-operative.
5 (4) Absa (Barclays) Kenya.
6 (5) Standard Chartered Kenya
7 (7) Stanbic Kenya.
8 (6) Diamond Trust.
9 (9) I & M.
10 (11) Baroda.

Co-Op Bank to acquire Jamii Bora

Kenya’s third-largest bank group Co-operative (Co-Op), which is listed on the Nairobi Securities Exchange, has entered discussions to acquire 100% of Jamii Bora bank.

Co-op Bank has an asset base of Kshs 450 billion (~$4.5 billion) and 15 million customers while Jamii Bora has assets of Kshs 12.5 billion (~$125 million).

Kitale branch

Jamii Bora’s assets have been on the decline and it is ranked number 36 by asset size with about Kshs 5 billion of deposits and Kshs 8 billion of loans at last reporting. Three years ago it was to raise $12 million from Equator Capital Partners and Progression Capital Africa, and early last year Jamii Bora was linked to being acquired by CBA, but that appears to have been shelved after CBA merged with NIC.

It is owned by Asterisk Holdings, Equator Capital Partners, Jamii Bora Scandinavia, Catalyst JBB Holdings, Nordic Micro Cap Investments (PUBL-AB), has 650 other shareholders and the CEO owns 1% as the largest individual shareholder of the bank.

Jamii Bora had made a few unfortunate forays in the corporate space, and became the largest shareholder of a restructured Uchumi, with about 15% ownership. It also got swept into the Kenya Airways debt for equity swap.

Jamii Bora has about 350,000 customers and with 17 branches. It has a strategic niche with micro, small, and medium enterprises offering LPO financing, lease finance and trade finance services as well as training and meeting space to business owners at its headquarters in Kilimani.

CBK launches Stawi SME pilot credit facility

The Central Bank of Kenya has launched a pilot credit facility targeting informal unbanked traders in partnership with local institutions.  This will be through an app, marketed under the name “Stawi”, that will initially be managed by five banks – Commercial Bank of Africa, Cooperative Bank, Diamond Trust, KCB Bank and NIC Group.

The pilot phase lasts two weeks and will involve 3,500 traders without bank accounts, who have turnover of Kshs 30,000 to Kshs 250,000 (~$2,500) per month and who are at least six months old. To register, besides providing their ID details, traders will need a valid business permit and an email address to create an account – this is an unusual as mobile apps just require a national ID number to match with the phone number of the loan applicant.

The businesses will be able to borrow between loans of Kshs 30,000 to 250,000 (~$2,500). Loan charges are at an interest of 9% per annum, plus a facility fee of 4%, insurance fee of 0.7% and excise tax on the facility fee – all adding up to about 14.5%.

Other features of Stawi:

  • Loans are repayable between 1 – 12 month and borrowers can top up loans once 80% has been repaid. Loans are only disbursed through the app as will all repayments be done
  • The loan rates are not cheap, but they are mild, and this program is targeted at the unregulated lenders who charge as much as 300% p.a. There was a draft financial markets conduct bill formulated to protect consumers from such practices.
  • There are also transfer fees and Stawi customers can also link up with Pesalink which allows much greater daily transfer amounts (up to Kshs 1 million) than the mobile money wallets.  
  • For now, there is no Stawi in the Google store as the program is still in a test phase. (There is an app called Stawika that has no affiliation)
  • A second round of the pilot will target 10,000 other traders.

While trying to forestall the arrival of interest rate caps back in 2016, banks, through their umbrella Kenya Bankers Association committed to set aside Kshs 30 billion for lending to SME’s including Kshs 10 billion to micro-enterprises owned by women and youth and lend to them at no more than 14%. They also committed to rank borrowers by high, medium and low risk and to work to reward low-risk borrowers with low-interest rates. To date, the credit reference bureaus piling up data on loan defaulters which good borrowing records are ignored or not rewarded with lower interest rates.

CBK Fines Banks over NYS Transactions 

The Central Bank of Kenya (CBK) has levied bank fines against five institutions over transactions relating to their handling of payments and movement of funds sent from the scandal-plagued National Youth Service (NYS).

The banks are Diamond Trust which handled Kshs 162 million, and was fined Kshs 56 million, Co-operative Bank which handled 263 million (and was fined 20 million), KCB which handled Kshs 639 million (fined 149.5 million), Equity moves Kshs 886 million (89.5 million fine) and Standard Chartered which handled Kshs 1.63 billion from the NYS, and which was fined Kshs 77.5 million.

The CBK statement read that the bank fines followed investigations into failures at the banks including; not reporting large cash transactions, not doing due diligence on customers, lack of support documents for large transactions and lapses in reporting suspicious financial transactions to the Financial Reporting Centre (FRC).

Notably missing was Family Bank that featured heavily in a prominent series of transactions of funds that originated from procurements at the NYS. It has been previously sanctioned and branch and senior staff are being prosecuted.

All the banks which handled NYS funds had been named earlier and the CBK statement added that this was not the end, with an additional group of banks set to be identified and investigated.

EDIT:  In a filing to the London Stock Exchange, Standard Chartered disclosed that the bank had, in December 2019, entered a settlement with Kenya’s Director of Public Prosecutions (DPP) to defer prosecution of the bank and any people affiliated with it, and which would see the bank pay a penalty of Kshs 100 million ($964,000).

Kenya Banks – Super Profits Back?

The simultaneous release on Thursday morning of half-year results of Kenya’s three largest banks portrays a picture of the banks resuming their super profits streak even as the government looks set to repeal interest rate caps later this year.

But the results are deceptive in that the banks have all shown flat growth in loans, despite the growth in customers deposits which have increasingly been channelled towards funding government debt, at the expense of the private sector.

The results showed:

  • Flat growth in loans: e.g while KCB deposits are up by Kshs 40 billion this year, net loans are actually lower than December 2017. 
  • Decline in assets and capital – as the banks noted that the adjusted capital ratios were due to CBK guidance on IFRS9. 
  • NPA’s up.  
  • Growth in the diaspora and the East Africa region.
  • KCB is expected to complete  the acquisition of Imperial Bank later this year

James Mwangi CEO of Equity spoke of the bank’s total income now being ahead of where they were in June 2016 before the interest rate caps were set by Parliament, and that the June 2018  results were achieved despite losing 40% of loan interest income in Kenya. Interest rate caps which were reintroduced in Kenya in 2016 were pushed at a time when large banks were recording “super profits” and which parliamentarians attributed to them charging high-interest rates to borrowers.

Another factor has been cost efficiency improvements through digitization and a move away from fixed investments in brick and mortar. Equity also reported that 97% of customer transactions were done outside branches and these accounted for 55% of the value of transactions, and their CEO said that in future, branches will be for high-value transactions, advisory services, and cross-selling products.

With the result of the three, along with that of Barclays and Stanbic earlier this month, we have results of five of the seven largest banks in Kenya and none from the smaller banks. Last year,, the top -ten banks took over 90% of the industry profits. What does IFRS9 portend for the smaller banks?