Category Archives: Family Finance

African Banker Awards 2019 Nominees

The winners of the 2019 African Banker Awards will be announced on June 11 at the Annual Meetings of the African Development Bank (AfDB) in Malabo, Equatorial Guinea. 

Multiple nominees this year include Absa, the Trade & Development Bank, Equity Bank, and Standard Bank while first-time nominees include Family Bank of Kenya who partnered with Simba Pay to enable payments via WeChat to China, Kenya’s largest trading partner. There are also nominees for arranging sovereign Eurobonds and IPO’s, while UbuntuCoin, an asset-backed digital currency that was a finalist at last year’s awards, is nominated again.

The complete list of shortlisted nominees for 2019 are:

African Banker of the Year:  Admassu Tadesse (Trade and Development Bank), Brehima Amadou Haidara (La Banque de Développement du Mali), Brian Kennedy (Nedbank, South Africa), James Mwangi (Equity Bank, Kenya) and Johan Koorts (ABSA, South Africa).

Award for Financial Inclusion: 4G Capital (Kenya), Amhara (Ethiopia), Bank of Industry (Nigeria), Cofina (Senegal), Jumo (South Africa).

Best Retail Bank in Africa: Coris (Burkina Faso), Ecobank (ETI), Guarantee Trust Bank (Nigeria), KCB (Kenya), QNB AlAhli (Egypt).

Deal of the Year – Debt: Absa ($350M Old Mutual Renewable Energy IPP), Afrexim – ($500M ChinaExim Syndicated Loan), CIB ($389M Egyptian Refining Company), Rothschild ($2.2 billion Republic of Senegal Dual-Currency Eurobond), TDB ($1 billion Sovereign Loan to the Government of Kenya).

Deal of the Year – Equity:  Al Ahly (Canal Sugar Equity), EFG Hermes (ASA IPO), RenCap (CiplaQCIL IPO), Standard Bank / RMB (Vivo Energy IPO), Standard Bank IBTC (Flour Mills of Nigeria Rights Issue).

Infrastructure Deal of the Year: Absa (Enel Green Power), Afrexim (Syndicated Loan for EBOMAF/Government of Cote D’Ivoire), National Bank of Egypt (ElSewedy Electric Hydropower Project), RNB (Roggeveld Wind Power Project), TDB (Mozambique FLNG Project).

Innovation in Banking:  ABSA (South Africa), Family Bank (Kenya), KCB (Kenya), MCB Capital Markets (Mauritius), and Ubuntu Coin (Côte d’Ivoire).

Investment Bank of the Year: ABSA (South Africa), Coronation Merchant Capital (Nigeria), NedBank (South Africa), Rothschild, Standard Bank (South Africa).

Socially Responsible Bank of the Year: Access Bank (Nigeria), Bank Misr (Egypt), Equity Bank (Kenya), KCB (Kenya), Qalaa Holdings (Egypt).

Bank Roundup: January 2019

The boards of NIC and CBA banks confirmed their plans to go ahead with a merger to create the largest bank in Africa by customer numbers. Serving over 40 million customers in 5 countries, the combined entity will have Kshs 444 billion in assets (~ $4.4 billion).

Currently, they are both at 115 billion of loans and have differences in deposits with 145 billion at NIC to 191 billion at CBA and customer numbers of 142,000 at NIC to 41 million at CBA. They had relatively similar customer numbers prior to CBA’s launch of M-Shwari in partnership with Safaricom. 

Going forward they aim to obtain shareholder approval in Q1, obtain regulatory approval in Q2 and have the new entity commence operations in Q3 of 2019. Currently, NIC has 26,000 shareholders and is listed on the Nairobi Securities Exchange (NSE) while CBA has 34 shareholders (20 individual, 14 corporations) including Enke Investments (24.91%), Ropat Nominees (22.50%), Livingstone Registrars (19.90%) and  Yana Investments (11.14%). The merger will be effected through share swaps that will result in NIC shareholders owning 47% and CBA shareholders 53% of the new entity whose shares will remain listed on the NSE.

MCB in Kenya:  Leading Mauritius Lender MCB Group has officially opened its representative office in Nairobi. The largest and oldest bank in Mauritius, with $12 billion in assets and a presence in nine countries, it had been licensed in Kenya back in 2015 and it will bank on its new office to gauge opportunities in the Kenyan market and build strategic relationships.

The 19th largest bank in Africa by assets, it is listed in Mauritius and has 19,000 shareholders. It has a strategic objective of growing its international footprint and expanding non bank activities. It has 1 million customers, 3,500 employees and 55 branches but, as it was communicated at the launch, they have no intention of opening branches in Kenya or East Africa.

Ethiopia Bank summary: Asoko Insight gave a summary report of the Ethiopian banking sector, parts of which are only available to subscribers. While some foreign investment is expected in Ethiopia, the banking sector is already privatized with fifteen of the country’s eighteen banks all having private local owners. The state-owned Commercial Bank of Ethiopia is the largest bank in the East Africa region with 1,280 branches and earns 67% of the sector profits in the country.  It has revenue of $1.3 billion, while 11 (other) banks, have revenues of between $50 million and $500 million, suggesting a more concentrated market in terms of size.

Tanzania:  NMB bank has waived several bank charges for their customers from February 1 including account opening, monthly maintenance, transaction fees, dormant account reactivation, and internal transfers – all in a bid to promote finance inclusion in the country.

Meanwhile, several Tanzania banks have a series of new managing directors including NIC Bank, Akiba Commercial Bank and Bank of Africa Tanzania

Family Bank pled guilty in the NYS case:

Diamond Trust CEO questioned.

Biggest Banking Stories of 2016

Some are carry-overs from 2015, but still having an impact on the banking sector in 2016 include:

1. The shutdown of Chase Bank in April 2016 came after a 24-hour period that started with a second set of 2014 financial accounts published in unclear circumstances in a newspaper, with different figures. Whether this was due to a reclassification of Shariah loans or (insider) director lending was never explained, but it accelerated an ongoing run of withdrawals and the Central Bank had to close the bank the next day. While it reopened a few weeks later with funding from the central bank (channeled through KCB), and depositors have been able to access some of their funds, the bank is not back to its full standing (it’s till not lending in full, and there’s a moratorium on depositors interest) and  new investors are being sought to enable the bank to stand on its own from April 2017.

2 Njomo Bill: In a rare bi-partisan move, usually reserved for their own salary raises, members of parliament rallied around to take on an even less popular target – that of super profit making, high-interest rate, banks with the Njomo bill. This was the latest attempt to rein in interest rates and the president surprisingly signed the bill, passing on a hot potato which was expected to lead to a slowdown in lending and make banks less attractive to investors.

3. Governor Patrick Njoroge at the Central Bank. Widely admired by the public for his no-nonsense enforcement & understanding of rules, supervision, austerity, and honestly to clean up the banking sector, but vilified in some circles for his unreasonable decision-making that has seen three banks close under his watch.

4. Last year Imperial Bank closure was a shock, and in 2016 the extent of the shell is still becoming clear through numerous court documents pitting the receivers, regulators, shareholders, some customers and even the family of the later managing director who engineered the fraud. But all that pained depositors want to know is, where is the money, how much money is there, and when will they get paid?

5. Lax government banking. From not following up whistleblowers on Family, Chase and Imperial, to a reluctance to act on South Sudan leaders. From double payments to government contractors, to county and national governments having dozens of banks accounts for inexplicable reasons. From a parastatal moving to a single signatory and withdrawing all its’ funds to pay a fictitious contract, and the funny banking of NYS money by Josephine Kabura at Family Bank. The anti-fraud / anti-money laundering/ anti-terror rules are  not being observed.

Banks React to Press

A couple of banks are in the news and are trying to put back some bad news.

Family Bank (No. 14 by assets) had been mentioned adversely at  parliamentary hearing s over the manner in which they handled accounts through which money frofamily-bank-statementm the National Youth Service was withdrawn. Related to that have been stories that the Central Bank of Kenya has recommended prosecution of several bank staff who oversaw these accounts. The bank has put out a vague statement on Facebook responding to the allegations and highlighting its strengths and management.

Another bank, Prime Bank (No. 18 by assets) is in the news after its Chairman was reported to be the second largest shareholder of Crane Bank in Uganda which was taken over last month The Bank first put out a statement noting that it has no links, facilities or exposure with Crane Bank in Uganda.

prime-bank-statementThere have since been more social media messages (WhatsApp and Twitter) including one claiming that some prominent customers had withdrawn cash from the bank in panic.

The bank has now put out a second statement clarifying that the people named as large depositors are in fact not customers at their bank and that they have lodged  complaint with the Central Bank and CID, asking them to investigate the source of the rumours.

Its’ difficult for banks to respond to such rumours, but they have to considering they can have an impact on liquify at the bank, even if they are not factual. The communication does not have to be online, but through reassurance to key depositors, customers and the regulators.

 

Kabura’s Peculiar Banking Habits

Last week Josephine Kabura got to testify about her banking transactions before a televised Parliamentary Accounts Committee (PAC) hearing of an ongoing investigation of the National Youth Service (NYS), and she made some rather startling claims about having tens of millions of shillings from the NYS deposited into her company accounts which she instantly withdrew in cash to pay her suppliers. But in the absence of closed-circuit television (CCTV) footage, which banks typically don’t keep for too long (the security companies erase them over if there are no security incidents), the documentation and bank rules covering cash handling risks, fraud, and money-laundering simply don’t support these claims.

While MP’s asked her about the physical improbability and difficulty of her carrying that money out of the bank (sums of Kshs 40 million in paper bags) to go pay suppliers at a quarry, the possibility of this is unlikely. A vault at an obscure bank branch is unlikely to have more than Kshs 10 million shillings sitting around. Banks allocate money to branches based on their usage (average daily deposits and withdrawals) and it is unlikely that such amounts of money in paper currency would ever sit idly around as there are insurance and cash handling costs and risks. 

Kabura testifies at PAC (pic from Standard)

Kabura testifies at PAC (pic from Standard)

Within the bank, risks managers and systems would have noticed patterns in her company accounts, previously empty, and now suddenly receiving millions of shillings per day, that she immediately withdrew in cash. Also when someone tries to send, transfer, or withdraw over $10,000 i.e. ~Kshs 1 million, it triggers an extra form at the bank that must be filled out and later sent to the Central Bank explaining the purpose of the transaction. Usually, the head office of a bank will ask for extra documentation, such as invoices or contracts to support the processing of such a transaction. A similar case with suspicious payments received from the Youth Enterprise Development Fund at Chase Bank showed how such account activity triggered alarm bells within a bank and subsequently with the regulators.

When Kshs 100 million is wired to your bank, it does not mean that Kshs 100 million magically appears at your bank branch to be withdrawn as cash. At any branch, the tellers and cash managers have limits of cash they can handle or approve at any given time. They have to get approval, or witnesses to do larger transactions and those are in exceptional requests. Bank systems are set up not to allow suspicious transactions that exceed pre-set limits and daily thresholds.

For more money to be allocated to a bank branch, a top decision would have to be made by bank directors to allocate and transport more money to serve the enhanced needs of customers at a particular branch. But it is more probable that such a customer would be “upgraded” and transferred to another branch for premium customers with better security and with higher cash limits. Such a customer would also be assigned a relationship manager to help them manage their liquidity (in this case – Kshs 1.6 billion in 14 months) even better and cross-sell them other bank products.

It is more probably, as MP Abdikadir Aden, postulated at the PAC hearing, that the cash was never really there. When large sums were wired in, withdrawal transactions were initiated to show that cash was being withdrawn, but that the reality was that, simultaneously, other transfers were done and cash deposit slips were filled in to reflect cash deposits for the exact same amounts, into other accounts, a few minutes later.

Finally, earlier this year, the Central Bank issued new rules that further restricted deposit or withdrawal of cash. Could this have been due to the same Kabura activities that happened over a year before?