Monthly Archives: February 2009

Equity leads the Kenyan Economy

The first Bank (as usual) out with the 2008 profits is Equity Bank with the usual staggering financial results (PDF) for 2008 with 101% growth in profits and 103% in loans.

But a closer look at the numbers show some more subdued stats that may indicate an economic slowdown, and which may be confirmed when other banks (especially Barclays and KCB) release their year-end results in the next two months.

– Equity’s growth in assets is 45% from a year ago, but 6% in Q3 and 3% in Q4
– Equity’s deposits are 55% up from a year ago, but this breaks down to 23% in Q2, 10% in Q3 and 6% in Q4
– Equity’s’ loans are up 87%, but the 41% increase in Q2, was followed by 17% in Q3 and 2% in Q4
– Expansion costs – income up 98% from a year ago, but expenses have kept track – up 97% from a year ago (in 2007, the spread was 73% and 52% in 06/07)
– Factor in Safaricom IPO lending (interest and fees) estimated at– and Q2 income was 3x higher than in any of the other two quarters
– Cross-checking against the 2007 election and disruption in economic activity, in 4Q of 2007, Equity had growth of 18% in deposits and 33% in loans with 54% in profits in same quarter, with in 1Q of 2008, had 8% deposit and 11% in loans, rates which outpace 4Q of 2008

Shareholders will be happy with the Kshs. 3/= dividend, but the 1 for 10 share split, will add a huge float of shares to an overflowing NSE pool.

Bank opportunities
most from the daily papers this week
– African Development Bank is currently accepting applications for its Young Professionals Program . Apply online by 20/2
– Barclays seeking debt recovery agents – auctioneers, re-possessors, valuers and investigators. D/L is 28/2
– Commercial Bank of Africa: senior manager finance. Apply through KPMG by 25/2
– Family Bank Bancassurance Manager. D/L for online applicatiosn is 6/3
– IFC Investment officer (private equity & investment funds division) Africa, based in Nairobi. D/L is 27/2

Share Portfolio February 2009


Quarterly portfolio review after last snapshot in November 2008

The Stable
Diamond Trust ↓
KCB ↓
Safaricom ↓
Scangroup ↓
Stanbic (Uganda) ↓

Changes
– Best performer: Diamond Trust -8%
– Worst performer Stanbic – 33%, Safaricom -23%
– In: none
– Out: none, but sold a little KCB in January

Events & Outlook
– Performance: Portfolio is down 20% in the last three months while the NSE Index is down 25%
– Did not buy KQ and Kengen as expected, but that should happen in the next few weeks as prices continue to drop
– Sat out the Co-OP IPO and made just one trade in three months (sold some KCB in January). Are brokers generating enough income to stay afloat? I hope they don’t try and introduce new charges levied on dormant investor accounts
– Money markets: Got started in money markets by signing up with a CBA Unit Trust
– Bond markets: The Government of Kenya has lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~600)
– Investor awareness: The CDSC started sending out monthly statements by e-mail to investors, cutting out the postal service, and alerting investors each time shares are bought/sold using their account.

Missing the TED Party

The ongoing TED Conference in California makes me think back to remember TED Global that was held in Arusha, Tanzania in 2007. From the opening talk by Euvin Naidoo President to the last talk President Jakaya Kiwkete this TED conference was a unique event; it was a magical event full of euphoric, optimistic and inspiring moments. Links, networks and friendship were formed and the path was set out to open a new chapter for Africa, through business & investment, with diseases & poverty largely eradicated. Sadly, in 2009, not much has changed in the continent and even some of the shining economic models then like Kenya, Nigeria, South Africa, have had politics overshadow and handicap their economic ambitions.

Housekeeping

New tools
– Heard about Twitter in Arusha, but only signed up last month. It’s a bigger world than blogging, and fills in a lot of the gaps e.g. found something unique, but too small to post, or you just want to share in a second via mobile phone? Twitter’s the answer!
– Never has much interest in photography as a blog tool, but got a camera now, so fellow shutterbugs – Hash, Mental, Afromusing, Mweshi – your influence has rubbed off, and I’ll be throwing in random photos of travel and daily work events here are a few

forest near Kericho

I found the Ark

would you steal these hotel sandals?
Getting some love
– Bankelele is listed as one of the 100 best blogs to learn about Africa – not sure how the selection was made, but there are some interesting reads on that list 87 Bankelele. Banking and business are at the forefront of this blog written by a Nairobi banker.
– The best way to learn about blogs in other parts of Africa or the non-Western (US, Europe) world is through Global Voices. They have a post that mentions the top-ranked blogs in Africa with Bankelele (ranks 18) from Kenya who writes about baking banking, finance and investment in Kenya and Bongo Celebrity (ranks 20)
– The Business Daily ( a Kenyan financial newspaper) had a feature on blogging with topics like Blog post revolution hits corporate Kenya, Blogs command attention of corporate world, Blogs emerge as avenues for making money, Companies use online platform to monitor views from the public, Fibre optic cable to pave way for corporate blogging, Mounting lawsuits could sound death knell for social sites and What is likely to compete with the mainstream media which noted Some are born out of events like bankelele.com Bankelele, started in 2004 after the blogger attended a “very riotous AGM.” And he describes his blog as “ It’s my diary of financial events —and as a banker and investor. I use it to keep track of pertinent events.

Anyway, I hope to link up with some friends from TED and collaborate on projects in the future and that the Business Daily leads to more corporate blogging opportunities and ideas in this part of Africa.

Profit Warning Friday

KQ Profit warning for Who?
Kenya Airways issued a profit warning a few days after media reports had painted a rather rosy picture of operations at the airline with increased capacity and utilization. (That’s what happens when you release operating results without any shillings or dollar attached.

The fuel price, PEV, and reduced tourism has been well known within the investment community and this did not appear to impact the price until the actual ad and media corrections were carried in the newspaper, perhaps spooking retail investors and the stock is down 22% this week. The operational figures already show that the airline is in turnaround mode and is being hammered when it has already hit the bottom. I need to attend more investor briefings. Neither announcement appeared at the Nairobi Stock Exchange (NSE) website where company quarterly announcements usually run

Profit warning at the NSE
On Thursday, the Capital Markets Authority (regulator) release a brief (copy here ) addressing issues perhaps that should have been said by the NSE. It noted that bear markets do happen (NSE declined 50% between 2000 and 2002), stockbrokers are in trouble (reduced activity, means low turnover and low commission), are restructuring (layoffs and branch closure s), and exposed (risks could arise from fraud. Nevertheless, shares are safe and better left to long-term investors!

We are not rogue this came a day after directors of Suntra Investment Bank, made a similarly candid admission of trouble ”business is so low at the moment that we are actually eating into our own funds” – one of the few times a financial institution has admitted being in difficulty, as they tried to contain damager (a single court case), but which left spooked customers flocking to transfer their shares

Executives on profit

  • Michael Joseph the CEO of Safaricom, Kenya’s most profitable company, launched an unusual rant against the government and business climate saying the first three things an investor needs in Kenya are (1) a generator (ii) a 4WD car (iii) a security firm – before they can even think about making any investment in Kenya. he said they spend 1.5 million euros on diesel and called the new universal service fund tax stupid as the mobile sector is already over-taxed
  • A man who sees no losses on the horizon is the CBK governor, who remains an eternal optimist after launching an infrastructure bond. Kenya plans to raise Kshs. 18.5 billion (~$245 million for roads, electricity generation & distribution) from investors who will pay a minimum investment of Kshs. 100,000 or ~$1,250). 12.5% interest will be paid semi-annually with principal repaid 2015, 2017, 2021. He had earlier commented that global meltdown should not have much impact because Kenya is primarily a rural agro-based economy

What else happening?

  • Kenyan knows Madoff: listed among the hundreds of fabulous fraudster Bernie Madoff’s clients is Sangare Ranch of P O Box 24 Mweiga Kenya Africa
  • Barclays Uganda counters rumours of a collapse/closure
  • Global credit rating of South Africa, previous rate triton high credit ratings of Kenyan companies with collapsed oil firm Triton downgraded to DD, Sasini’s ratings maintained at BBB+ (triple B plus) and A2 (single A two) for the long and short term respectively, and Eveready East Africa Limited downgraded to BBB+ (triple B plus) and A2 (single A two) for the long and short term respectively. Moody have downgraded Toyota today, so who’s safe
  • Fuel shortage was experienced in Nairobi – back and forth between Kenya pipeline company, ministry of energy, oil companies who all absolved themselves for any responsibility; Read more at Coldtusker
  • Who’s the Total Man at the NSE?
  • Mumias profit down 73% to 231 million at the half year on sales of 6.2 billion (down 8%)

Insuring the masses

In a quiet month for banks Equity Bank is making some quiet strategic moves for the long term, that may shake up the insurance sector in Kenya.

They have started selling insurance cover to their customers through their wholly owned subsidiary Equity Insurance Agency. Like with the health care package they started selling last year, it is quietly marketed to customers within the banking halls only – no public adverts so far and little mention elsewhere. Customers can sign up for motor vehicle insurance, domestic over, personal accident & travel, medical, and fire & burglary for businesses.

Equity continues a trend of rolling out products that are useful but have low penetration in Kenya like medical insurance and mortgages (they own a ¼ of Housing Finance)

Also they were earlier reported to have acquired an investment banking license from Juanco Investments – a little known company who’s also one of their shareholder.