Category Archives: KCB

Bank Rankings Part 1: Kenya’s Top 10 Banks

2016 was an interesting, but also a challenging year, with a few key events happening that will alter the industry and future bank rankings going forward.

Who are the top banks at the end of 2016? We should start having their audited 2016 results published over the next eight weeks. But who will top the bank rankings for 2016, and why? (last year‘s bank ranking in brackets)

September 2016 numbers used

1 (1) KCB Kenya’s largest bank. growing at 5% year, going to embrace digital in a few weeks. KShs 480 billion in assets, 21.7 billion in pre-tax profit, with Kshs 372 billion of deposits and Kshs 332 billion of loans

2 (2) Equity Bank. Kshs 380 billion of assets and 19.5 billion profit. Deposits grew 15% in the year but they have put most of that in government securities.

3 (3) Cooperative Bank: Kshs 352 billion assets and 15 billion profit. Coop is using digital and agents to contain costs.

4 (5) Standard Chartered: Kshs 264 billion assets and 10.7 billion profit.

5 (4) Barclays: Still keen on growing in Kenya despite parent Barclays having to sell off the Africa unit. Growing at 10% a year, Kshs 264 billion assets and 8.7 billion profit.

6 (8) Diamond Trust: Still growing at 20%, probably benefiting from the fallout at Imperial. Kshs 230 billion assets and 6.2 billion profit.

7 (6) Stanbic: Shed the CFC part of the CFC-Stanbic name 10 years after the merger

8 (7) Commercial Bank of Africa. CBA was the the largest bank by customer numbers, thanks to M-pesa powered M-shwari, but loans are flattening. Kshs 211 billion assets, 5.4 billion profit.

EDIT  9 I&M Bank EDIT 

10 (9) NIC bank. Kshs 156 billion assets, and 4.5 billion profits.

EDIT 10 (13) Citibank: breaks into the top 10. Kshs 116 billion assets, and 4.1 billion profits.

Just out of the top 10, is I&M bank and troubled Chase and National banks. It is important to note that all the top banks, led by KCB, Equity and Coop all embrace a mix of agency and digital/mobile phone banking as a basis for future growth.
$1 = ~Kshs 101

KCB to Unveil a Digital Finance Future in Q2 of 2017

KCB is working on revolutionizing their banking strategy that will culminate in a digital finance rollout in a few weeks. This was revealed by KCB CEO Joshua Oigara at a financial technology forum at the Capital Club in Nairobi that featured futurist & author Brett King. Oigara said that in their 100 years of existence, KCB had gained 5 million customers, but in the two years since launching KCB M-Pesa, that number had doubled.
KCB is working with King and Deloitte, on new digital finance products and strategy, which they had already shown to the Central Bank of Kenya (CBK), who have to approve banking products and changes in the country.  Oigara said that customers are adaptable and don’t mind the changes, but that it is banks that have resisted innovation, and that said he has met many young KCB customers who have never been to branches (mobile is all that matters for them).

Numbers from KCB’s last Investor briefing (Q3 2016) show that 73% of KCB transactions were done outside branches (up from 62% a year earlier). Also, 75% of customers use mobile phone banking services and 91% of loans transactions are processed this way – and they averaged 80,000 loans per day after adjusting bank loan terms in line with the banking amendment law late in 2016.

Digital banking was worth Kshs 641 billion ($6.4 billion) to KCB and of that Kshs 332 billion (52%)  was from mobile. 18% (Kshs 116 billion) was from internet channels, while ATM was responsible for 17%, 9% from agency banking, and 4% (28 billion) from merchant channels.

Rumours are that the bank’s strategy would be akin to Equity Banks’ 3.0 strategy .  This would enable KCB to manage customer accounts, cash, loans, insurance, as they send money or buy airtime, and sell them other products at a lower cost than agents and branches, while also integrating better with their customer lifestyles.

Writing in the Business Daily on the financial technology revolution that’s coming to East Africa, Oigara cautioned that, currently, a lot of the innovation in finance is happening outside traditional banking and finance institutions and beyond the sphere of regulators to manage risk in banking.
KCB will be having more fintech forums in the coming months.

Make Innovation the Centre of your Business and Job or Face Disruption

These were the words of Brett King, a futurist and bestselling Author spoke about disruptive innovation to guests at a business forum at the Capital Club, Nairobi. He had been invited by KCB Group, Kenya’s largest bank, which he is advising on a digital finance strategy.

He said that companies that are based on innovation and technology ( E.g Google, Facebook, Alibaba, Baidu, have ten times more profit (~$500,000 per employee) than traditional companies of ($30,000 per employee) or banks ($50,000 per employee)  as they are more efficient at converting production to profits

Other comments:

  • Historically technology that is cool but disruptive ,is resisted and he compared Luddites who smashed factory machinery in England in 1812, to taxi drivers smashing Uber cars in France 200 years later.
  • He expected more contextualization of financial service a based on location and behaviour: e.g. walk into an Apple Shop and you get a finance offer on your phone about a new device you have been longing to buy.
  • Bitcoin’s ability to be a currency is hampered because owners of the coins are hoarding them like gold so they appreciate in price (which is now $1,000). They are not using the bitcoins to make payments which are what currencies are meant to do.
  • There’s a bright future for peer to peer (P-2-P) insurance (more than P-2-P lending).
  • The service jobs there today will be replaced by automation/robotics. But this creates even newer service jobs (every job lost to technology create 2.6 others), and students considering careers should ask themselves how they will compete with Artifical Intelligence (AI) or work in jobs that enable the future e.g. solar adapters.
  • Entrepreneurs should create businesses that take advantage of AI. The mid-2030’s will be an exciting time as there will be more energy from renewable sources than fossil fuels and more robots than humans.
  • On Kenya’s revolutionary M-pesa, which had facilitated the fastest financial inclusion shift in history, he said it was clunky as it was designed for feature phones.

Chase Bank Depositors Update

This morning, the Governor of the Central Bank met with depositors of Chase Bank. He reassured them that, even if the receivership process had been silent, they were his priority and that they were working as fast as they could to reopen the bank and give them full access to their deposits. He said there was a lot of support and goodwill (no one has sued him in this case, as has happened with other banks), and that the numbers at Chase Bank were not mysterious (unlike with other banks). He mentioned that they recovered Kshs 8 billion from directors within two weeks and that they were working to accelerated debt recovery and get non-performing loans performing.

He added that contrary to the perception that the bank should never have been placed under receivership other banks and that this has made investors lose faith in banking in Kenya, he said that other bankers tell him that the sector has gotten stronger, more stable and more credible as they believed it was important to clean up this sector and that laws were followed. He said that other countries were looking at Kenya and emulating actions e.g. Uganda, Tanzania, Mozambique.

Phase three of the receivership now commences, and in the next few weeks, they are inviting final expressions of interest to invest in Chase Bank for them to review. They want serious investors who will have the resources (no Mickey-Mouse, or Johnny-come-Lately ones) to support the bank and take it higher even after the receivership is lifted which should be sometime in Q1 2017. He hoped that matter is wrapped up by the time the first anniversary (Chase Bank was placed in receivership on April 6 2016) comes round, and that Chase Bank becomes a case study for bringing a bank out of receivership and sustaining it.

There were lots of question from shareholders, on asking for timelines for full restoration of the bank, payments of any other tranches (no plans for that), that they should get paid interest for the receivership period (he said he’d rather work towards them getting full access to their principal deposits and have any discussion of interest with the new investors).

He thanked KCB and the hard working staff of CBK, and mentioned that a KPMG audit of Chase was still ongoing. He thanked the customers for their support which he said was indicative of their belief in the bank. 13,000 new accounts have been opened since the receivership was lifted and only a tenth of what they expected was withdrawn when the bank was reopened.

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