Category Archives: Basel II

What Africa means to Barclays

Last week, Barclays Africa released their our 2015 Integrated Report (PDF). It comes in the  backdrop of the Barclays Africa sale that is still reverberating, with denials that the Bank will be divesting from Africa.

It notes that :

  • The Barclays PLC sale is meant to deconsolidate Barclays Africa from an accounting and regulatory perspective and that the Barclays Africa chairman, Wendy Bull, has already resigned from two Barclays (UK) PLC boards so there’s no conflict of interest.
  • The 2015 results demonstrate that we are delivering against our strategy and ambition. We made a profit of R14.3bn, with headline earnings up 10% and a return on equity of 17%.
  • Barclays Africa has a presence in 10 countries. Kenya is the second largest of the 10, but they all trail South Africa by a large margin (79% of the group revenue is from South Africa,). Tanzania has similar numbers to Kenya, but they are contributed by two different banks (BBT and NBC)
  • Barclays parent owns, 62%. The other top 10 shareholders include Public Investment Corp (SA) with 5.6%, Stanlib assets 2.2% and others with 1% each including old Mutual, Sanlam, Prudential, Vanguard, and Blackrock.
  • Barclays Africa has 12.3 million customers.
  • Retail & business banking account for 72% of revenue, corporate & investment-banking 20%, and wealth management 7%.
  • They paid 8.6 billion rand in dividends, 7.3 billion in taxes and 20.9 billon rand in salaries to their 41,000 employees across Africa.

Barclays Africa CEOThe report (We actively sought shareholder views so as to further develop our remuneration reporting) has a levels of disclosure,that would be welcome in Kenyans banks and companies  who have endured a horrible year of governance issues with almost 20 companies declaring profit warnings after previous ‘robust’ years, under long-serving CEO’s.

  • It details the salaries and bonus of the CEO (Rand 28 million), top executives, and non executive (independent) directors of board members (which included the Barclays Kenya chairman).
  • It also lists the performance dashboard of al the executives, and of all the key segments of the bank in their own pages.  Not like Kenyan banks which have the Chairman’s statement noting the tough economy, then (after magic happens) the super profit that was achieved.
  • It lists key matters discussed by the board , tabled month by month, and incorporates the balanced scorecard.
  • No individual director or group of directors has unfettered powers of decision-making.

1 Rand  was about Kshs 7.2, and 1 Rand was about $0.07 in December 2015. 

Barclays Exiting Africa

An announcement that Barclays will exit from 12 African countries has had a bit of reaction:

  • Barclays Kenya which just  had its 100 years celebration in Kenya, had this statement which mirrors that released in many of the countries where Barclays is, to reassure customers.
  • Citi Research had two statements, one of which  noted that the sale is meant to de-consolidate for both accounting and regulatory purposes. The time period given is 2 to 3 years. Also that (1)  they question the rationale behind the disposal given that Africa-attributable profit had higher growth compared to the core bank and was double that of the investment bank (2) they don’t believe that there are buyers ready & waiting (3) regulatory approval is not guaranteed .

Still it’s been a decade of stagnation of the bank that was number one in Kenya, 10 years ago, but which has alternately shrunk and held back, while local competing banks have expanded, leaving Barclays hanging on in the top 5, and now with half the asset size and profits of market leader, KCB.

Capitalization in Bank Mergers

Today should see the announcement of a merger between Southern Credit and Equatorial Commercial (ECB) banks.

They are both yet to release their full year results for 2009, (have until Thursday) but this will likely be a loss year for Southern (Kshs. – 145m in 9 months) ahead of the combination of the 32nd (Southern) and 35th (equatorial) ranked banks in Kenya with combined assets of about Kshs. 9.3 billion ($120 million) – but which were not growing as fast as their smaller peers in the competitive Kenyan market with 44 commercial banks.

The Nairobi Star today reports that the reason for the merger as the need for Southern Credit to raise their capital to the Kshs 1 billion mark after a deal with foreign investors had fallen through and this amount will be the combined capital size of both banks. The article further describes this as a takeover of Southern – a bank with structures but no capital by ECB – which is a bank with capital but no structures

Elsewhere, in the Market Whisperer [offline] column of last week’s East African newspaper shoots down the justification behind a market rumour of Equity Bank’s (valued at $787 million) interest in acquiring National Bank of Kenya (valued at $133 million) as two over-capitalized banks who don’t need each other.

It notes that NBK which was restructured by the Kenya Government is in essence still a government banker beholden to government securities which account for majority of its income, rather than traditional lending while Equity is struggling to lend out its huge capital infusion and already has a (much) larger distribution and product range than NBK.

Kutwa Tuesday: December 31 2008

1. Yes it’s Wednesday
2. this is the final post for 2008
3. Happy New Year
4. Welcome first time readers searching online for primary school exam (KCPE) results. This is a blog on finance and investment issues in Kenya mainly
5. stories you may have missed in December 2008

– National Oil Corporation NOCK will borrow $65 million from French Bank PNB Paribas
– Triton Petrol (now under receivership) has left several local and international banks exposed to bad loans. They were also partners of Reliance (India) in the second national Operator contract
– From January 2009 Kenyans can buy government bonds and bills for just Kshs. 100,000 (~$1,300) through the Central bank of Kenya. The next bill auctions are on 5th January for bills while bond are on 26th January. one must open a CDS account with the CBK (currently they hold 4,222 accounts that trade in GoK securities) more details here
– The CBK also released a report on commercial banks readiness and compliances with Basel II requirements
– New branches Banks opening new branches in December were National bank of Kenya (Kakamega, Eldoret airport, Embu, Ongata rongai), Bank of Baroda (Nakuru) and CFC Stanbic (Kisumu, Westlands – Westgate)
– Dyer & Blair Investment Bank will arrange a fund raising plan for TransCentury, one of Kenya’s leading Private Equity firms
– Standard Chartered expected to roll out a mobile banking platform in 2009 in Kenya for funds transfer, utility payments etc. (already operational in Uganda)
– Uchumi made a payment to debenture holders in December, can it re-list at the Nairobi stock exchange in 2009?
– Co-Op Bank shares began trading at the NSE – but mini bounce on day one was not sustainable

from the blogs
– Kshs. 2.5 billion worth of Equity shares trade hands in a surprisingtrade yesterday
– NIC Kenya’s leader in asset finance, but more retail and corporate has ventured into Tanzania acquiring 51% of S&F Bank – more here
– Want to buy goods online, but you don’t have a credit card – read up on Afripay – a local company that offers that service in Nairobi
– Why is it so hard for foreign (German) companies to invest in Tanzania?
– While Pirate terrorize the east African Coastline, what should be Kenya’s flagship navy vessel is rotting away in Europe.

Co-Op IPO Aftermath

A formal statement is out today after Monday’s press conference where the bank’s management revealed that through their 2008 IPO, Co-op Bank had raised Kshs. 5.4 billion (~$77 million) but short of a revised target of Kshs 6.7 billion as 66,576 shareholders bought 546 million shares. The Business Dailyreports the shares will be allocated 60% to individual investors (340.5 million shares) , 30% to institutions (171 m shares ) and staff will get 9% (52.6 m shares)

Capital raising: the offer was not underwritten (by D&B winner – best lead transaction advisor and best investment bank), but despite the shortfall, what was raised should be enough for a few years. Co-op’s capital adequacy goes from 9% to about 18%, which is not bad [10 billion would have taken to this to 22%]

Other banks that have been reported to have engaged in recent private capital raising include K-Rep and Southern Credit while others who may need to tap shareholders next year could Chase, CBA, CFC Stanbic and even KCB (for the third time in five years?)

Glass Half Full: Though Co-op had initially set out to raise Kshs 10 billion, their listing came at a tough time and was not received as enthusiastically as past IPO’s. Still it had some positives but came in a tough market before the target was revised down, but has some positives

– For the bank: 66,000 shareholders is a manageable register , and since they did a lot of the placement and receiving work in house, the IPO was not as costly as others (budgeted at Kshs. 248 million)
– For new shareholders: no refunds to queue for, and for once a 100% allocation
– For other serious investors, a brief return to sanity as the IPO speculators with their borrowed funds kept away – Co-op was the fall guy that injected some reality back into IPO process and share investments.

2009 IPO’s: Next year could see the entry of Nakumatt supermarkets, bread maker a DPL and others from the private sector.

From the public sector (Government side) comes a series of planned privatizations a few of which could be IPO candidates to assist the Government in fund-raising:

Top of my my wish list is Kenya Pipeline, whose much improved governance saw a consortium of banks line up this month to offer the company funds for expansion (a few years ago KPC was using dubious financial intermediaries) and Kenya Wine Agencies. In addition, more shares of Kengen East African Portland Cement Company and National Bank will be sold to the public.

Other non-IPO candidates will be targeted at strategic partners [for Kenya Ports Authority- and TEAMS (submarine cable)] while private investors may be sought to invest in the sugar companies [Chemelil, Sony, Nzoia, Miwani, Muhoroni] hotels of Kenya Tourism Development Corporation, banks [Consolidated Bank, Development Bank of Kenya] and food processors [Kenya Meat Commission, New Kenya Co-operative Creameries]