Category Archives: Co-op

Kenya Top 3 Banks

Yesterday Co-Op Bank announced their 2016, third quarter earnings, and with that we have the numbers in from the top 3 banks.

KCB: Assets: 480 billion, loans 332 billion, deposits 372 billion, pre-tax profit 21.7 billion

Equity: 380 billion, loans 221 billion, deposits 271 billion, pre-tax profit 19.5 billion

Co-Op: 351 billion, loans 226 billion, deposits 256 billion, pre-tax profit 14.9 billion

$1=Kshs 101

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

Banks Yield (Capping Kenya Bank Interest Rates Part V)

Yesterday, CFC Stanbic became the first bank to extend the capping of interest rate loans to apply to existing loans.

While most banks had announced they would adjust loan rates for new facilities to a maximum of 14.5%, they were waiting to see what the Central Bank (CBK) would say about existing facilities.

But within the space of a few hours,  the Kenya Bankers Association announced this was extended to existing facilities. Other banks like Cooperatie Bank, KCB Group, and Diamond Trust also announced the extension of the new rate cap to existing loans and (edit) Barclays too.

difference in loan repayment

“…Consequently, the KBA wishes to announce that its members have agreed to prospectively reprice existing loans, which will see existing customers enjoy the benefits of the new law once it is operationalised. Each KBA member bank will therefore notify their customers on the process and new terms as the industry engages with CBK on the implementation.”

The big banks are leading, but there’s still silence from a few large ones (Barclays, Equity) and most of the smaller ones, except Transnational and (edit) GT Bank. KCB also clarified that the new interest rates do not affect mobile (phone) loans.  i.e m-pesa loans

The reduction in loan interest rates will mainly have the effect of enabling people to pay off their loans faster than originally scheduled. The above banks have all invited their loan customers to visit branches to discuss the repricing of loans. New loan agreements will have to be drawn if they choose to adjust their loans, as some banks had issued fixed rate loans. Loan installments may or may not change, and the difference will depend on the size of the original loan.

Kenya Interest Rates Part IV – Coop Bank Leads

Ever since the banking amendment act was passed by parliament virtually all banks have announced reductions of interest rates to comply with the last KBRR – and all have reduced by 0.97% effective August 25.

Kitale branch

Coop Bank branch

But yesterday Cooperative Bank (Coop Bank) was the first to reduce its rates to 14.5% (the Central Bank Rate plus 4%). In a statement from the bank CEO, this new rate will apply for all new loans or credit facilities.  The modalities of the new law that was signed by the president this week, have not been outlined (such as if the rate is retroactive), but virtually all bank share prices have nose-dived over the last two days, with some banks pulling back on unsecured new credit facilities to customers.

Coop Bank is Kenya’s third largest bank, with a loan portfolio of Kshs 220 billion (~$2.18 billion).

The Fusion Real Estate REIT (FRED)

You can now invest in Kenya’s second REIT (Prospectus – PDF), that closes on Friday this week. The Fusion Development Real Estate Investment Trust (a.k.a. FRED) aims to raise Kshs 2.3 billion ($23 million) through the sale of 100 million units at Kshs 23 each.

FRED comes after Stanlib’s Fahari I-REIT that launched last year. While Fahari was an I-REIT, this one is a development REIT (D-REIT). Stanlib, who aimed to raise Kshs 12.5 billion, ended up with Kshs 3.6 billion, a 29% uptake, which included an investment from the IFC. The minim investment was affordable (Kshs 20,000) but Kenyans are slow to take to exotic products in this case REIT’s as opposed to the usual bonds or shares, and that one came amid a spate of bank collapses.

FRED plans to use the Kshs 2.2 billion (i.e Raise Kshs  2.3 billion minus issuance costs of Kshs 100M) for Greenwood Park, a mixed development comprising shopping mall, office block and residential apartments that is currently under construction in Meru.

The REIT manager is Fusion Capital, and the REIT Trustee is Co-Operative Bank of Kenya (Coop). Fusion Capital, TT Africa Real Estate and Binder Limited are the vendors, and Coop will purchase on behalf of the REIT. The  construction has started at a 2.5 hectares (6 acre) plot. The  value of land (Kshs 330M), contractor work done (Kshs 547M), and other work In progress (Kshs 186M) plus other items add up to Kshs 1.15 billion. They have certificates payable of Kshs 239M and a net asset value of Kshs 892M of the development.

 Other Features

  • The units will be listed on the restricted market segment of the Nairobi Securities Exchange.
  • Minimum subscription is 50% (Kshs 1.15 billion – and the promoters will make a decision on allocation of units, extension of dates or withdrawal, if the minimum is not reached).
  • Minimum investment is a subscription for 218,000 units worth ~Kshs 5 million (so this means they will get about 450 investors at most for this which will be a closed fund)
  • The offer runs from 23 June to 15 July
  • Other partners include Fusion Investment Management (REIT manager), NIC Capital (lead transaction advisor) Mboya Wangong’u & Waiyaki, (legal advisors), Deloitte Consulting (reporting accountant) Ngotho Consultants (property valuer) Burbidge Capital (SPV valuer) Citiscape Estate Agents (property manager)
  • Expenses include lead transaction advisor (Kshs 30M), legal costs (6M), Reporting Accountants (0.7M), selling commission (35M), CMA fees (7.5M), NSE fees (1.25M) PR costs (2M), Advertising costs (8M) – total Kshs  99M.

Fusion Capital is undertaken the projects including Flamingo Towers (Upper Hill – Kshs 1.3B), Upward Scale (offices on Ngong Rd – Kshs 1.5B), Hand in Hand (residential in Athi River – 600M), Starehe Homes (90 3 BR apartments in Mtwapa – Kshs 1.2 billion ), and Kigali Heights (office next to Kigali convention centre – Kshs 3.7B)

The retail, entertainment and lifestyle facility, measuring 25,000 square metres when complete  that would be the centre of attraction in Meru County for many years to come. The promoters  anticipate 100% occupancy for the residential, offices and retail spaces. They have chosen to sell the residential parts (2 bedroom apartments for Kshs 10 M & Kshs 10.3M and 3 bedroom ones for Kshs 13 M) and that combined with office (Kshs 12,000 psf) and retail (Kshs 21,592 psf) space rents will lead to a payback in 3 years.

Meru Nanyuki road

Other

It’s been reported that Nakumatt will be the anchor tenant at Greenwood mall and that 45% of the mall has been booked.

Also investment firm Cytonn had a report which noted that:

  • We analyze(d) returns on the Fusion D-REIT offering, and recommend our investors to participate in the offering.
  • As compared to other investment opportunities such as a 5-year Kenya T-bond currently yielding 13.2%, FRED offers equity IRR of 20.5%,. 
  • However, the key risk is the ability of the development to be executed within the defined parameters.
  • Mombasa, Kisumu and Nakuru are the leading frontiers in mall space supply, after Nairobi… The Mt Kenya region which comprises of Meru, Embu, Nanyuki and Nyeri has the largest development pipeline, and Meru and Nanyuki have been identified as investment frontiers due to population growth and tourism activity.

EDIT: On  July 17, the deadline was extended to July 26.

EDIT 2 : On  July 27, the deadline was extended, for a second time, to August 4.

EDIT 3 : On  August 5, the deadline was extended, for a third time, to August 24.

EDIT 4 : On  August 26, the results were published in the newspapers which showed that Fusion had achieved a 38% subscription rate, raising Kshs 873 million from 4 investors (3 of whom were shareholders in the asset being acquired). The offer did not meet the regulator criteria of 7 investors or the 50% target for the promoter. Nevertheless the promoters will seek alternative funding to complete the project construction on time and consult the CMA and NSE about reopening the REIT  at a future date. 

$1= ~Kshs 100