Category Archives: EADB

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.

Financing Lake Turkana Wind

Monday this saw the signing of final agreements for the financing of the Lake Turkana Wind Power – LTWP project. This was the completion of a long, 9-year process that began with a fishing trip on Lake Turkana, that yielded no fish, but a lot of wind on the boat trip. 
The signing of finance deals worth 498 million euros (~ Kshs. 60 billion), will go towards LTWP which at Kshs. 75 billion is arguably both, the largest single wind power plant in Africa and, the largest single private investment in Kenya
The  Kenya Government has committed to raise the country’s electricity generation capacity to 5,538MW (from the current 1,533MW) by the year 2017. 630MW of that will be from wind, and they have identified five strong wind areas in Ngong, Turkana, Kinangop, Kipeto, and Isiolo – and hopes that using renewable sources of energy like wind will bring down the cost of electricity to consumers, and save on fuel import costs for the country.
The government’s KETRACO agency will build a 428 kilometer, 400 kV line, from Loyangalani to Suswa Suswa to Laisamis that they say will be ready in 24 months and which will also link up with geothermal plants along the way.
Image from LTWP website
The LTWP which will generate 300 MW, using 365 turbines in Laisamis (Marsabit) was registered in 2006 and brought on Aldwych International as an investment and development partner in 2009.
Financiers in LTWP include the African Development Bank (AfDB are the lead arrangers and who have provided a guarantee against some delays have also financed $1.7 billion in power generation in Africam with 39% of that going to private sector companies) the European Investment Bank. Standard Bank (Stanbic), FMO, Nedbank, EADB, PTA, PKF, DEG, Proparco and soon OPIC (US)
Other partners in LTWP include Vestas (turbine supplier), the governments of Denmark (proving EUR 135 million including 120m in export credits), Netherlands, and Spain (who are financing the Laisamis- to Suswa transmission line).
Next, the Kenya government wants to expand the number of last mile electricity connection while KETRACO also plans to extend the transmission lines to Northern and North Eastern Kenya – and on to Ethiopia, Tanzania and Uganda. This will serve the regional transmission purposes and also open up northern Kenya.
Joseph Njoroge,  the Energy principal secretary, said additional electricity opens up opportunities such as enabling the pumping of crude oil, the Standard Gauge Railway is also planned to use electric trains, Iron Smelting, as well as clinker production (by Athi River and Dangote).

Bank Tales II

Maina T kind of started this thread with a review of the P/E correction of Nairobi Stock Exchange (NSE) shares.

NSE: ½ full or ½ empty? – to take it further, how are NSE shares today compared to last October? If you considered them fairly priced then, you are frowning today, but if you considered them over-valued, are you smiling today?
– Shares that have appreciated since October 2007: 4% – BAT Scangroup, 3% – Access 3%, 1% – Unga
– Shares that have depreciated since October 2007: (83%) – Mumias (74%) NIC (59%) Nation Media Group, CFC (55%) – Housing Finance, (53%) – Sasini (51%) – Kenya Airways (47%) – Sameer (45%) – Kengen, Centum (44%) – Eveready (43%) – Williamson (42%) – Express, Jubilee (41%) – KPLC, Kenol
– Banking sector: Best (4%) – NBK, worst (-74%) – NIC, sector average is -32%

Interesting that despite the world financial meltdown of late 2008, the Kenyan financial sector is faring no worse than other sectors (agricultural, industrial) which are all down approximately 1/3,and remains the sector most likely to produce super-profits again this year. Best performing sector is commercial services (excluding Safaricom only listed in June 2008) which is down 20% from a year ago

Cheap M&A The depressed NSE prices bring out good and bad banking opportunities.
– Good for anyone speculating on buying into a Kenyan bank. The Helios stake in Equity is priced as almost what it was when the deal was signed, while the CFC/Stanbic merger is worth ½ as much as it was a year ago.
– Bad for the Government who are hoping to raise funds from further sale of NBK and Development Bank of Kenya share. It also raises a question of how Co-op Bank IPO shares will be received i.e. if you enter a train going down hill and you want to go up hill, where will you end up?

Family Bank a recent stockskenya discussion could indicate that a listing of shares could happen soon.

EADB: sad tales on the East African Development Bank.

Bank Safety Net

and other brief’s

Kenya’s deposit protection fund results are also out. They fund had about Kshs. 18 billion ($240 million) invested in government securities to protect depositors in case one of Kenya’s 45 banks collapses – and pay each account holder up to Kshs. 100,000 (~$1,333). The fund now covers account holders in the two new Shariah banks who were excluded a year ago

Lending crunch? wooing customers
– CFC/Stanbic – win out of the blue; open an account with Kshs. 10,000 and win one of 5 cruises, flat screen TV, digcam, ipods, satellite TV decoders (with subscription)
– Stanchart – take unsecured loan of Kshs. 750,000 or more and get a DVD player
– KCB – spend more than Kshs. 2,500 on your credit cards and you may win a DVD, TV, mobile phones or a holiday

Going regional Equity Bank hiring staff to work in South Sudan, while East African Development Bank is hiring staff to work in Rwanda

Mobile payments Old Mutual customers/fund investors can now pay their monthly subscriptions by M-Pesa – Safaricom’s mobile phone money transfer facility. Banks have already a ceded a significant chunk of the local the money transfer business to mobile phone, who are now expanding into investment and utility payment turf of banks.

Kutwa Tuesday

West to East: Following Bank of Africa (2004) and Ecobank (taking over EABS), West African’ leading bank, United Bank of Africa (UBA) is making an entry to East Africa starting with Uganda and have also applied for a license to bank in Kenya.

Venture Capita Fund: From the East African Development Bank (EADB) is now operational, with small and medium enterprises (SMEs) in East Africa are eligible for funding.

Uchumi’s turnaround : Uchumi have finally published their financial results of the receivership period from 2006 to 2008. The turnaround has been remarkable and in the half year ending December 2007, they surpassed full year sales from 2006 (year of collapse). Still, the current ratio is still poor (less than 1), but that’s about three times better than it was when the company sunk.

The company lost 751 million in June 06, which improved the first year of receivership to a loss of 257m in 07 – and are on track to make a profit in 2008 – while operating fewer stores. It’s probably too soon to be re-listed (there would only be sellers, no buyers) and a dividend would not be likely for 5 years as the company still has an accumulated loss (negative reserves) of about 1 billion shillings ($15 million)

peeves two things irritate me though at Uchumi (i) their cashiers never have any shilling coins and insist on giving out sweets in lieu of change (ii) Cashiers’ who take advantage of my not having a u-card to top up their accounts with points I pay for.

Insurer collapses: Invesco assurance finaly goes under. The company which insured many matatu’s is now under statutory management and can’t make any policy payments or sign up new business. And when the history of the company is written, one paragraph must address why almost every insurance company (including Invesco) decided to put up an expensive office building in the Upper Hill area of Nairobi, far away from their core clientele.

Kenya Re profits: How much did Kenya Re earn in 2007? An interesting discussion at stockskenya.

Diaspora dollars: How much do Kenya’s abroad remit to the country (through official channels)? CBK reports $54 million in January 2008 and teh country is on track for an increase from the $573 million sent in 2007.

Dollar launderer: A Nation report cites US concern about money laundering in Kenya which has weak laws regarding the crime. The State Department report notes the difficulty as Kenya is a hub that mixes regional trade with exports to East & Central Africa, donor aid & NGO’s (managing over U.S. $1 billion annually), remittances from expatriate Kenyans estimated at $680-780 million annually, and Eastleigh Estate which handles unofficial remittances by the Somalia Diaspora. Also, though banks maintain records of transactions over U.S. $100,000 and international transfers over U.S. $50,000 (and report them to the CBK) they fear customer reactions to such release of information – and thsi was hammered home by a November 2007 court award that ordered Barclays Bank to pay a customer 400,000 shillings ($5,700) for providing customer details to the British High Commission.

New boards
– The Kenya college of communication and technology (KCCT) board now has Michael Joseph, Nick Nesbitt, Naushad Merali and Paul Kukubo to guide some relevance in communications training.
– The Resettlement fund (for election victims) has retired archbishop Ndingi, former minister Akaranga, and retired athlete Kipchoge Keino on board.