Category Archives: banking act

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 Safety Net

and other brief’s

Kenya’s deposit protection fund results are also out. They fund had about Kshs. 18 billion ($240 million) invested in government securities to protect depositors in case one of Kenya’s 45 banks collapses – and pay each account holder up to Kshs. 100,000 (~$1,333). The fund now covers account holders in the two new Shariah banks who were excluded a year ago

Lending crunch? wooing customers
– CFC/Stanbic – win out of the blue; open an account with Kshs. 10,000 and win one of 5 cruises, flat screen TV, digcam, ipods, satellite TV decoders (with subscription)
– Stanchart – take unsecured loan of Kshs. 750,000 or more and get a DVD player
– KCB – spend more than Kshs. 2,500 on your credit cards and you may win a DVD, TV, mobile phones or a holiday

Going regional Equity Bank hiring staff to work in South Sudan, while East African Development Bank is hiring staff to work in Rwanda

Mobile payments Old Mutual customers/fund investors can now pay their monthly subscriptions by M-Pesa – Safaricom’s mobile phone money transfer facility. Banks have already a ceded a significant chunk of the local the money transfer business to mobile phone, who are now expanding into investment and utility payment turf of banks.

To Coop or Not?

The big debate now is if the Co-Op Bank IPO should go ahead this month or if it should be postponed. The Chairman of the Nairobi Stock Exchange has issues conflicting statements on the matter but appears to have bowed to the arrangers and the stockbroking community line that it should go ahead.

IPO’s in London and New York are beign deferred as they are unlikely to be warmly taken up, and here, the dearth of IPO’s in the pre-Kengen was guided by the sentiment that they would not perform well in the then deflated markets. Even the giant IPO of Safaricom – was postponed till after the 2007 elections.

The timing is just not right, with two collapsed stockbrokers still being sorted out, Safaricom refunds not fully reconciled, and the Diaspora who were so enthusiastic about Safaricom still (i) worried about repercussions of the US financial markets turmoil (ii) real estate and (iii) feeling suckered by Safaricom’s post-IPO performance which they heavily invested in.

Though the funds raised are targeted towards, mortgage finance, ICT and branch expansion, the Co-Op IPO should be postponed to at least next year. It withstood the 1998 Nairobi bomb blast and has turned round a Kshs. 3 billion loss to a similar profit in 6 years and a few more months won’t make a difference. But as a fall guy of Safcom, I’ll revert to my IPO bypass plan when the Co-op IPO arrives.

Need for Capital; Co-op is a fast growing bank with a retail and branch base like KCB and Equity that requires capital to be shored up. The two banks that were most in need of regulatory capital – KCB and Housing Finance have already had rights issues in 2008, and other shareholders should prepare for the same at CFCStanbic, Prime, CBA, among other smaller banks.

NSE/CMA to note; In the wake of Crown Berger and Portland Cement share collapses, it should be noted that irregular share trades happen – even to Google – but the prices were re-adjusted and trades made at erroneous prices were then canceled.

Opportunities

Barclays graduate program: The Barclays Graduate Emerging Managers (GEM) is open

US Visa The DV 2010 diversity visa (US green card) lottery kicks off today and runs till December 1

TED Global 2009: Registration for TED Global 2009 at Oxford is open.

Bank charges survey

The Central Bank and FSD Kenya released a report on bank charges – a summarized version of which is now available from the CBK site.

It is an interesting report based on a survey of several hundred bank customers. CBK used to publish bank charges every quarter in the newspapers from about 2003 to 2005, which were not clearly understood by the public then they appear to have decided to used FSD Kenya to do a more comprehensive analysis.

The report highlights a problem, which many bank customers face. They start a relationship with a bank for one reason, but without knowing all the charges for various others banks services. E.g. it shows that you may take a loan at one bank because of the low-interest rates, but pay a lot more to service the loan, or you may open an account because of the low opening balance or free salary processing, but find it very expensive to do anything else.

Charges form an important part of bank income (the top 5 banks earnings based on commissions were Oriental, EABS, Baroda, Family Finance and Equity who all earned over 50% of their 2007 income from non-interest earnings).

In terms of bank charges, Equity Bank has been very popular for two reasons

(i) They came on to the banking scenes four years ago without any legacy charges; while other banks used to adjust their charges, based on what other banks were charging, Equity were able to set their own charges
(ii) Many of their services (with low charges) are offered to customers and non-customers alike – like 50-shilling banker’s cheques.

I hope the report, and others from FSD Kenya, will be republished in a daily newspaper for the millions of bank customers who don’t have Internet access to review (this is the case in Uganda)

CFC-Stanbic Bank EGM: merger approved

An extraordinary general meeting to approve the CFC – Stanbic merger was held on November 12 at the Intercontinental Hotel

Deal: Stanbic is the largest bank in Africa with a presence in 18 Africa countries and 21 others around the world (including Bank of America in Argentina which they just bought). It has assets of $140 billion and 43,000 employees – and by combining their (relatively) small Kenyan operation with CFC, they will become the 4th largest bank in Kenya.

Approval got: CMA, CBK, monopolies commission.
Approval to be got: shareholders, SA reserve bank, NSE.
The Deal should be complete in about a month.

The meeting was led by CFC Chairman Charles Njonjo. Fellow director J. Kierini introduced the board and, other dignitaries present who including D. Ndonye (Deloitte), Jimnah Mbaru, Kaplan & Stratton advisers, and Craig Bond and a team from Stanbic include his son who works at Stanbic Kenya.

CFC MD Soundararajan explained the rationale for the merger – synergies, very similar and complementary customers, regional opportunities, and enhanced capital adequacy. Customers will get a one-stop shop for all their business, staff get to work in a bigger bank with more careers opportunities (and all employees are assured of retaining their jobs).

Shareholder questions

Dilution of minority shareholding? : Management said they are getting into a bigger entity
Are major shareholders bailing? : Gambit will get paid in new shares but also about 5.8 billion shillings. MD answered that shareholders are staying and the company is not going anywhere
Mgmt. afraid to say that CFC being; Management says it’s a merger, and not a sale; the new entity will have 40% – CFC and 60% – Stanbic shareholders.
If CFC is growing well, why sell? Need for capital is important. MD said that he needs about $100 million, while the new entity will have around $60 – 70 million. The merger will enhance the company’s growth plans
Due diligence on Stanbic? ; Done and they shared strategies which each other to see if they were on the same path. Also, board member (and lawyer) Fred Ojiambo denied that a 25 billion shilling lawsuit had eroded the value of Stanbic (K) saying that claim had no firm base
Why no bonus shares instead of selling out?: MD said CFC had in the past given the largest bonus divided in the history of NSE 21 for 1 and the board will consider that at the right time

This is it: The historic moment passed in a flash as the Chairman proposed that all six resolutions be passed in a single vote since they were all interdependent.

The resolutions passed in a single vote:

Created 117 million new shares to accommodate Stanbic
Empowered the directors to allot shares to Stanbic
Changed the name of the company to CFC Stanbic Holdings
Transferred the bank business (assets, liabilities, employees, creditors etc.) to Stanbic
Amended the new articles of association
Changed the business of the company from a bank to a holding company
Now CFC Stanbic Holding co to remain listed on the NSE while CFC Stanbic Bank will be a 100% owned subsidiary

Other speakers

Craig Bond: The Head of Stanbic Africa, said they got lucky in Kenya as the first bank they identified turned out to be the right partner offering great synergies; in Nigeria, they have looked at 6 banks which have not panned out. He said that Stanbic which intends to be the ‘best emerging-markets bank’ in the world had identified 3 countries that they intended to dominate in Africa – SA, Nigeria and Kenya where they intend to break into the top 2 (not remain #4), by rapidly expanding branches in 2008.

Commenting on the largest bank in the world ICBC buying 20% of Stanbic (it’s 70% owned by the Government of China) – he said China is coming to Africa in a big way for her resources, and it offered Stanbic cheap money with the promise to match them $ for $ in any investment in Africa

NSE Chairman Jimnah Mbaru said he was proud that the deal happened under his watch and confirmed that he expected NSE to approve the deal by end of the week. He looked forward to having a big institution with the capital to enable the economy to meet growth goals in terms of resources. And finally called out to family-owned companies to see what could happen if they transform themselves into institutions as the late Mr. Jani had done with his firm which was now merging with Stanbic.

There were further tributes to the late Mr. Jani who created the company in 1951 with a vision for into to partner with an international powerhouse, MD Soundararajan and directors Njonjo and Kiereini for making the deal happen

Humorous moment: Chairman Charles Njonjo was sad that there were only ‘5’ shareholders present when the meeting started but got happy as the numbers had reached about 100 by the time it ended. However, it didn’t really matter as he had 45% proxies from Africa Liaison and Gambit while fellow director Kiereini had 30%.

Goodies: souvenir pen, umbrella, big lunch box with little food from intercontinental – (Fanta, cake, apple, and a bit of goat, chicken, and sausage)

other news

Barclays launched tranche one of its bond – 1 billion shillings, maturing in November 2014.

Rwanda and Burundi to join the East Africa Development Bank once they subscribed via share capital

Equity Bank extends banking hours to almost match office hours; 8 a.m. – 4:30 p.m. on weekdays and 8 a.m. – Noon on Saturday

The National Housing Corporation is offering investors loans to build rural and peri-urban homes. The maximum loan amount is only 1.5 million shillings – and it’s advanced at 13% over up to 10 years

Sasanet investors want to notify partners, bankers, and other companies (including Safaricom) that the company had not refunded investors their funds.

Urban transport gets more expensive as all the major transporters Citi Hoppa, KBS and matatu owners start a blanket 10 shilling per ride fare hike to counter rising fuel prices