Category Archives: Equatorial

Capitalization in Bank Mergers

Today should see the announcement of a merger between Southern Credit and Equatorial Commercial (ECB) banks.

They are both yet to release their full year results for 2009, (have until Thursday) but this will likely be a loss year for Southern (Kshs. – 145m in 9 months) ahead of the combination of the 32nd (Southern) and 35th (equatorial) ranked banks in Kenya with combined assets of about Kshs. 9.3 billion ($120 million) – but which were not growing as fast as their smaller peers in the competitive Kenyan market with 44 commercial banks.

The Nairobi Star today reports that the reason for the merger as the need for Southern Credit to raise their capital to the Kshs 1 billion mark after a deal with foreign investors had fallen through and this amount will be the combined capital size of both banks. The article further describes this as a takeover of Southern – a bank with structures but no capital by ECB – which is a bank with capital but no structures

Elsewhere, in the Market Whisperer [offline] column of last week’s East African newspaper shoots down the justification behind a market rumour of Equity Bank’s (valued at $787 million) interest in acquiring National Bank of Kenya (valued at $133 million) as two over-capitalized banks who don’t need each other.

It notes that NBK which was restructured by the Kenya Government is in essence still a government banker beholden to government securities which account for majority of its income, rather than traditional lending while Equity is struggling to lend out its huge capital infusion and already has a (much) larger distribution and product range than NBK.

Bank Tales

(4) The Nairobi Star newspaper reports today that the ravenous Libyans are going to buy Equatorial Commercial Bank from Naushad Merali and other shareholders.

(3) T24 Rules: over a week ago KCB converted to the Temenos T24 banking system with some customers experiencing hitches – and next weekend it will be the turn of CBA to do the same.

(2) (Nairumor II) Minister(s) are itching to get licenses to open their own banks (hopefully not a return to the days of political banks)

(1) ( Nairumor I) that the Co-Operative Bank IPO will not be sold by all stockbrokers. Co-Op bank will do investor registration and most of the processing at their own (52) bank branches, with assistance from only a few brokers. That could be bad & painful news for stockbrokers as the low volumes traded and the depressed NSE this year have meant less than projected commissions & income.

Bank Review ’07 Part II

Small banks, range from $40 to $100 million

Showed an inability to grow as faster as the bigger bank, with few exceptions. Yet they are still profitable and reluctant to merge

The banks got a temporary reprieve when parliament shot down the government’s proposal that banks should have a minimum capital of 1 billion ($15 million) 3 years from the current 250 million shilling minimum’ but that proposal is likely to be revisited by future finance ministers.

35. (38) Fidelity Bank: Estimated assets 3.2 billion ($45.7M), profit of 45 million ($0.7 million) shillings for this quiet bank with little marketing activity but which was able to grow 40% during 2007.

34. (36) Credit Bank: Estimated assets of 3,300 million and profit of 120 million, for another quiet bank which grew about 15% in 2007.

33. (33) Middle East: Estimated 3.2 billion assets and profit of 80 million in 2007. However deposits and loans are down 6% from a year ago.

32. (35) Habib Bank: Estimated 3.5 billion assets and profit of 90 million, with growth of 12% from a year ago. Participated in the first Diamond trust rights first issue as a possible merger step.

31. (29) Victoria: Estimated 4.2 billion assets 140m in profit. Flat growth expect in loans and deposits (1%), but great in profitability which is improved by over 40% in 2007.

30. (32) Consolidated Bank: Estimated 4.5 billion assets, 20 million profit with the 30% growth from a year ago. There was public fallout between the MD and the board resulting in the board being fired by the Finance Minister. The Deposit protection fund (DPF) of the Central Bank plans to sell its 51% stake to private sector, and is likely to be found next year by private sale. A loss in 2005 makes the bank ineligible for an NSE listing and the owners the collapsed banks that form Consolidated Bank are likely to figure in as potential buyers.

30. (31) Equatorial: 4.7 billion assets and 90m in profit. The Sameer group bank Out-performed corporate big sister CBA growing by about 15% in 2007.

29. (34) Development Bank of Kenya: Estimated 4.8 billion and 200m in profit. Remarkable growth fro a development finance institution to record 45% growth in loans & deposits. Part of ICDC’s (Government) 90% stake in the bank is up for sale in 2008.

28. (28) Southern Credit: Estimated 4.9 billion assets, 80m in profit. 10% growth in loans and deposits, with about 40% growth in profits in 2007. Bank with a lady MD focus on cards

27. (30) Chase Bank: Estimated assets of 5.0 billion, and profit of 130 million. The winner of small bank awards, will open new branches next year and has set about achieveing a recapitalization target of 1 billion, through retained earnings.

26. (26) Giro: Estimated 5.3 billion assets, 70m in profit. With 7% growth in the year, It was supposed to be sold to state bank of India, but the deal is yet to be approved by regulators.

25. (27) Guardian: Estimated 5.8 billion assets, 45 million profit. Growth of about 15%

24. (23) ABC: Estimated 5.8 billion assets, 170 million in profits. With 12% growth from a year ago, ABC was one of the few ‘small’ banks that had a marketing push to target new customers in 2007 in addition to a recapitalization drive. Launched ‘kisima’ a flat fee account and has new branches.

23. (24) Habib AG Zurich: Estimated 6.1 billion assets, 200 million profit for another quiet bank which grew about 15% in 2007.

22. (25) K-Rep: Estimated 7.2 billion assets, 200 million profit . With international shareholding and micro-finance expertise is an natural candidate for a merger Was 29th two years ago and recorded about 60% growth in 2007.

21. (21) Bank of Africa 7.2 billion ($103 million) assets 160 million shillings ($2.3 million) profit in 2007. What is hopefully the first of many West African banks spreading eastwards has opened new branches and targeted growth of new business like asset finance.

(Not Quite) A Bank Merger

Commercial bank of Africa, the No. 3 Bank in Kenya took over First American Bank, the No. 12 in a deal announced this week.

It’s not quite a merger, but more a realignment of business divisions since the two banks have a common shareholding among prominent wealthy families in Kenya and the deal will consolidate the shareholding of the two banks in one entity. Both the Jomo Kenyatta and the Naushad Merali families have a substantial interest in the two banks.

Merali owns a 14 per cent minority stake in CBA and bought out First American Bank of Kenya from First Bank of Chicago in 1987, in addition, to also owning Equatorial Commercial Bank through his Sameer Group which is ranked No. 17.

(Rankings from the Market Intelligence 2003 Banking Survey)