Category Archives: Stanbic

Acorn Green Bond for Student Accommodation in Nairobi

This week saw the approval of the first-ever green bond in Kenya, issued by Acorn Holdings to fund student accommodation projects around Nairobi.

Acorn is one of the largest developers in Kenya, having delivered over 50 projects worth $550 million in the last decade. These include the local headquarters for Coca Cola, Equity Bank and Deloitte, and the UAP Tower, which is currently the tallest occupied building in Nairobi. They plan to raise up to Kshs 5 billion ($50 million) investors through a bond that has a bullet maturity in five years and which pays 12.25% interest. The green bond issue is partially guaranteed by GuarantCo up to a maximum of $30 million.

Acorn has ventured into purpose-built student accommodation (PBSA), under two brands, Qwetu and Qejani. They are developing projects close to universities around Nairobi, which target students at campuses of USIU, University of Nairobi, Daystar, KCA and Riara universities.

This is to address the current situation where the increasing number of students at universities live in sub-standard housing, without amenities, in poor condition or which are considered unsafe. These are mostly in older building not designed for students such as former domestic-staff quarters. Yet students require reliability water & electricity, Wi-Fi, security, furnishings etc. and which ensure security and privacy.

Qejani is a high-rise, mass-market, offering which students can rent for between Kshs 7,500 -12,500 ($125) per month for single, double or quadruple room accommodations, while Qwetu is their premium brand.  The funding will go towards completing student accommodation facilities including Qwetu USIU Road 3 & Road 4, Sirona Phase 1 & 2, Bogani East Road Qwetu, Bogani East Road Qejani, and Nairobi West Qwetu.

The green bond offer, which is restricted to sophisticated investors, opened on 16 August and closes on 27 September 2019. Allotments will be done on 30 September 2019, with the minimum level of subscription set at 40% for it to be deemed a success.

Other aspects of the bond issue:

  • It is restricted to sophisticated (institutional) investors.
  • Opened on 16 August and closes on 27 September 2019. Allotments will be done on 30 September 2019.
  • The minimum level of subscription is set at 40% for it to be deemed a success.
  • Stanbic Kenya is the issuing and paying agent for the green bonds, and they will confirm that funds will not be used for more than 65% of the project costs with Acorn contributing the other 35%. 
  • Helios Partners are investors in Acorn.
  • GuarantCo is sponsored by the governments of the UK, Netherlands, Switzerland, Australia and Sweden and by FMO, the Dutch development bank.
  • Moody’s Investors Service has assigned a provisional B1 to the Acorn bond.
  • The issue will be certified as a green bond given that Acorn’s projects are constructed in accordance with the International Finance Corporation – IFC’s EDGE (“excellence in design for greater efficiencies”) requirements for sustainable buildings and certified by the Green Business Certification Inc. (GBCI) “.. they aim to steer construction in rapidly urbanizing economies onto a more low-carbon path. Certification is based on benefits generated from providing solutions in construction and operation: energy, water, and materials.” 
  • The green bonds program is endorsed by the Central Bank of Kenya, the Capital Market Authority and the National Treasury.

S&P ranks top banks in MEA (Middle East & Africa)

Qatar National Bank (QNB) with $229 billion of assets is the largest bank in the Middle East and Africa (MEA) zone according to S&P Global Market Intelligence. It is followed by First Abu Dhabi with  $182 billion and then the top African bank, which is the Standard Bank of South Africa (Stanbic) with $164 billion of assets. Fourth and fifth are banks from Israel which S&P notes rose on the list due to the appreciation of the country’s Shekel currency versus the US dollar.

S&P MEA top bank origins

South Africa has the most African banks on the list with First Rand (ranked 8), Barclays Africa with $94 billion of assets and which is rebranding to Absa is ninth, while Nedbank and Investec are in 13th and 27th place respectively on the S&P list.

Other African banks are the National Bank of Egypt (14)  and Attijariwafa of Morocco (23 ). QNB, which has been publishing quarterly results in Kenyan newspapers alongside other commercial banks, is also the second largest shareholder of Ecobank of Togo, but there are no Nigeria banks or any Sub-Saharan ones from the East or West blocks of the continent on the MEA list. Kenya’s largest bank group – KCB has about $6.5 billion of assets.

QNB and the banks on the MEA list are ranked according to IFRS accounting principles but certain banks use local accounting measures e.g Israeli GAAP, Eqyptian GAAP and Qatari GAAP.

The MEA banks are a sub-set of S&P’s list ranking the largest banks in the world. The list was topped by four banks from China, led by the Industrial & Commercial Bank of China with $4 trillion of assets, followed by China Construction Bank, Agricultural Bank of China and the Bank of China. There is more diversity after that with Mitsubishi UFJ of Japan in 5th place with $2.8 trillion of assets, followed by  JPMorgan Chase (USA), the UK’s HSBC and in 8th place is BNP Paribas of France with $2.3 trillion of assets. Eighteen of the top 100 banks are from China, with $24 trillion of assets, the US had eleven banks and Japan has eight banks, but none from the MEA.

Banking History in Colonial Kenya

This morning there was a talk given by Christian Velasco of Warwick University on A Colony of Bankers: New Approaches to Commercial Banking History in Colonial Kenya. He said there have been very few books written about the early banking history of Kenya and East Africa and he had sourced information from the Kenya National Archives in Nairobi, and scattered bank archives in the UK, South Africa, or Australia, but that many records were now lost.

Excerpts 

There were the banks that came before the first World War and a raft of banks that started after the end of the Mau Mau war – and the banks could fall into three categories: Colonial banks (state-supported banks that were the only ones that could handle government accounts, and which disappeared after independence), Imperial banks (less dependent on government business, and who focused more on trade and agriculture) and multinationals (who had most of their business abroad).

The story is of Kenya’s colonial banking era is really about three banks – the National Bank of India (NBI), Standard Bank of South Africa (SBSA) and Barclays. The arrival of Barclays in Kenya changed the banking sector greatly as it sought to end the long relationship that the National Bank of India had with colonial government in Kenya. Also when Barclays arrived, they found that the Standard Bank controlled many of the white accounts, so they set out to include more Africans as customers. Africans had bank accounts from around 1926, and by the 1950’s Barclays had more African accounts than settler accounts. 

Banks were mostly found in urban areas and with the ending of the Mau Mau uprising, there was an expectation that Kenya would remain a British colony for many decades. This resulted in several new banks setting up in Kenya in the 1950’s. Meanwhile, NBI, SBSA, and Barclays all expanded by 100% opening up in new places around the country, even with mobile bank units to attract customers. Despite the arrival of the new banks, the main competition remained between these three established big banks, and in 1954, Barclays sent a memo to the colonial government complaining about the unfair practice of them favouring the NBI who retained a monopoly of new business that dated back 60 years. 

All banks eventually had to break with colonial past and the British empire, and a big loser in the period was SBSA which had concentrated on the white settler population. Kenyan politicians tried to engineer boycotts of businesses related to South Africa due to the Apartheid regime and African customers now shunned it. Officials at the bank wrote to their headquarters about the problem and as a result, the name was changed by dropping “South Africa” from the name, and SBSA became “Standard Bank.”

However Africanization of staff did not start until quote late – Barclays had 1,000 employees, and just 70 were Africans with many more who were Indians. There was a hierarchy in banks of having whites being top managers, middle jobs were done by Indians and Africans, the clerical jobs – and this was because customers did not want to deal with African staff.

Stanbic to Increase Kenya stake to 75%

Stanbic

August 17 EDIT: Stanbic Africa has been granted an extension by Kenya’s CMA to acquire another 27.3 million shares and take their Stanbic Holding shareholding to 75% up through December 2019.

July 23 EDIT : After the two rounds of tenders closed, Stanbic announced that they received acceptances which resulted in their Kenya shareholding increasing to 68%. The statement adds that they have applied to continue buying shares of the bank through the market to reach their 75% target i.e from other shareholders of the company through the Nairobi Securities Exchange.

June 21 EDIT: Results of the first closing were announced and Stanbic received offers of 26.32 million shares out of the 23 million target and they will buy 23.56 million shares valued at Kshs 2.24 billion shillings – which will increase their shareholding to 65.96%. The second phase already commenced on 12 June, and those who participated in the first phase will begin to receive payments from 25 June. Participants who take part will forego the Kshs 4 per share dividend.

May 16 EDIT: Stanbic published a new notice in which the offer changed to a tender on a “willing-buyer, willing seller” basis with no element of compulsory acquisition. It will be in two phases which run from May 21, with the first closing to June 11 and the second on July 2. This will allow those who take it up the offer to be paid earlier – and that will be after the first closing date. Preference is given to the shareholders with less than 10,000 shares, and Stanbic shares now trade at 89-92 shillings.

March 16 2018 Original: Stanbic Africa Holdings (Stanbic) – SAHL has tendered an offer to other shareholders of its Kenyan subsidiary who may be willing to sell their shares to the SAHL group at a premium as it seeks to increase its stake in Kenya’s 8th largest bank.

SAHL, which owns 237 million shares representing 60% of Stanbic Kenya, is seeking to buy another 59 million shares, which will take its stake to 75% (296 million shares) as part of a commitment to grow its business in Africa. Stanbic Kenya is listed on the Nairobi Securities Exchange and SAHL has declared that the shares will remain listed after the deal and have applied for an exemption from being required to make a formal takeover.

The bank shares were trading at Kshs 83 before the announcement, and SAHL is offering to buy no more than 59 million additional shares at Kshs 95 (~$0.94) a share. SAHL states that it will give preference to shareholders on the register date for up to a maximum of 10,000 shares in the offer, which runs to April 27.

In 2016, Stanbic Kenya had 4,424 shareholders, 3,837 of whom owned less than 10,000 shares, and 1,838 of these had less than 500 shares. While SAHL states that it is not acting in concert with any other parties, it is entirely possible that the three largest shareholders behind SAHL in the Kenyan bank – two foreign firms and one local company who may own a combined 59 million shares may be targets of the offer.  One of the shareholders has also recently divested from owning large stakes in other NSE-listed companies including Athi River Mining and Kenol-Kobil.

SAHL established its banking presence in Kenya in 2007 by initially merging with the CFC Bank Group. Shareholders who take up the new offer to sell their shares will also forego a dividend of Kshs 4.00 per share declared this month when Stanbic reported bank profits of Kshs 5.6 billion along with assets of Kshs 239 billion, loans of 130 billion and deposits of Kshs 153 billion.

2018 Kenya macro prospects are largely positive

Kenya’s economy is projected to grow by 5.6% from 4.7% last year, Stanbic Bank economists projected on Thursday. The Kenya macro economy was supported by improved performance in the agricultural and tourism sectors rippling down to the manufacturing and services sectors.

Pic from KenyanWallStreet

Jibran Qureishi, Stanbic’s Regional East African economist explained the Stanbic Bank Kenya Purchasing Managers Index (PMI) served as a leading indicator as it vindicated itself over the quarterly GDP growth rate. He underlined the importance of the government’s focus on credit growth to the private sector, improved agricultural policies, the balance of payments and exchange rate.

Recent ranking in the ease of doing business report, end of the political impasse, improved efficiencies in ports and expected increase in foreign direct investment (FDI) would hopefully promote the economy over the 6% year on year growth target which Kenya has only achieved five times since 1980.

However, Kenya’s debt service costs which are mainly external and fiscal consolidation needs to be thought about more carefully for a better and consistent economic performance and Mr. Qureishi warned that the biggest downside risk to the growth outlook would be slower private sector credit growth and fiscal consolidation. He stated that the introduction of IFRS 9 (replacing the IASB 39)  will make the credit growth drought recovery sluggish although the demand side for credit is improving and that the government also needs to develop a sound industrial policy which would have productivity gains rather than increasing expenditure on new infrastructure projects.

In summary:

  • Inflation likely to fall in H1.18 and thereafter edge higher as 2017 short rains have been good.
  • Expected rebound in the agriculture sector.
  • KES to be steady in H1.18.
  • GDP growth likely to recover in the near to medium term.

Here’s a recap of other recently-released economic forecast reports on Kenya.