Category Archives: CFC

Bank Wars

Equity vs. Barclays
Equity Bank is often cited as being what caused banks, especially Barclays Bank to change their focus. But is it true, or is Barclays expanding all over Africa not just Kenya, in terms of opening new branches and expanding into the retail sector.

political muscle: A recent editorial strongly defended Equity and it has also received strong defense from Government ministers whenever allegations have been thrown against the bank.

Equity has also not been shy in employing political muscle themselves. The delayed conversion of rival building society into Family Bank has been linked to Equity’s influence and the bank was also instrumental suffocating pyramid schemes who grew to rival banks for deposits while ironically relying on banks for their massive fund transfers to/from investors.

Equity in 2008: Even if 2008 brings in a new government, Equity Bank should be ok. While the current government has been kind to Equity, giving it the space and access to market, environment to expand, Equity has been smart to use their access to Government to grow, without necessarily going to bed with the government. I.e. targeting government and parastatal deposits and banking business. Equity has expanded nationwide and has customers throughout the country and a positive image as a mwananchi bank. Think Kenol, not Mugoya for Equity next year, if the election follows the current polls

other banking briefs

Barclays bond: Barclays Kenya will issue a $75 million bond over 7 years.
Seem receptive, though their last bond to finance a mortgage business was scuttled by former finance minister who asked that the bank invest new money into Kenya, not borrow from the local market. That should whet the appetite for corporate investors who may be put off by the anticipated over-subscription (wasted funds, lost opportunity, delayed refunds) of a Safaricom IPO

But is Barclays parent in trouble? The global financial crisis has also taken done in the Citi (bank) CEO

Merger slows It’s a shame that the CFC-Stanbic merger can be jeopardized by a frivolous lawsuit frivolous lawsuit. How does a 50 million shilling dispute balloon into a 25 billion shilling lawsuit for damages?

City Finance is expected to be taken over by new owners. Kenya’s smallest bank should get a boost from new owners – as it is the only loss making bank so far this year. As at June this year, it had assets of just 510 million shillings ($7.7 million) in assets, deposits of of 131m, and loans 218m.

Collapsed banks update: Capital Finance and Pioneer Building Society are to be wound up while customers of Daima Bank will be paid another dividend

Bad loan relief?: The interest rates advisory centre offers loan and mortgage interest recalculation, financial cost assurance (overdraft, loan interest), in-duplum interest recalculation for the period (1/1/2001 to 31/7/2005) and informs its clients that that all bank charges from 1/11/89 may be illegal!

Though IRAC won against Housing Finance, bad debt relief may be a pipe dream for most, except for a few instances

Other corporate news

Keroche going into beer production after huge bill handed to them of unpaid taxes. This is the last thing that Kenya Breweries wanted to hear

The Minister for Finance has approve the takeover of Kobil Petroleum by sister company Kenya Oil Company Limited (Kenol). But Kobil is/was a Delaware corporation?

Fake sugar: Strange saga of a ship which arrived at Mombasa with contraband sugar already packaged in Mumias sugar bags – ready to go to store shelves. Packing sugar in their ‘produced in Kenya’ branded bags has been a key branding initiative by Mumias to differentiate it from imported sugar and seems to have worked, but counterfeiters can only be kept at bay for so long

Wananchi TV: convergence as Kenya’s largest ISP wananchi is going into partnership with GTV to begin high speed cable and satellite TV all in one package.

Also mobile TV on phones : a few months ago, the bosses of Kenya Broadcasting Corporation were on TV from a golf tournaments talking about their plans for the rest of the year which included launching a new radio station and also coming up with the first news broadcast via mobile phones by September. (Read on – KBC is a shareholder in the local multichoice Kenya)

Opportunities

– A new Equity Fund in Kenya urgently looking for a financial systems engineer with banking experience. Apply to ndeman2@yahoo.com

– Apprentice to Africa. The Apprentice Challenge comes to Africa – with $200,000 in prize money

Tax Collection is Unprofitable

KRA shocker: The Kenya Revenue Authority, the organization which has re-written our donor relationship, championed responsibility/awareness of tax paying among citizens, spurred parastatals to start paying dividends back to the government (instead of draining it) and enable the fixing of the economy – is not profitable!

Year end results (June 2006) show the tax collector with income of 4.8 billion and expenditure of 6.0 billion – meaning a deficit of 1.2 billion and that compares to 2005 when they just about broke even with 5.1 billion of both income and expenditure. They also don’t have the title-deed to their headquarters – Times Tower worth 2.5 billion that is still in the name of Central Bank (for whom the tower was built).

Stanbic CFC merger approved:  The Finance Minister has approved the merger between Stanbic and CFC paving the creation of the country’s 4th largest bank (see bank rankings and an earlier comparison of the parties)

The combined, but yet to be named, bank will have assets of over 55 billion shillings ($800 million), deposits of 43 billion, loans of 30 billion and a pre tax profit as at June 2007 of 934 million ($14 million)

Capital markets authority (CMA) approval should be a formality, as they have already been assured that the new bank will remain listed on the NSE.

MP behaving badly: A high-flying MP has grabbed i.e. taken over and fenced the parking lot of a popular Nairobi Sports Pub which he frequents the place – even as he is trying to extract an exorbitant rent from the pub for use of the yard.

Kenya Bank Rankings

June 2007 [ and change from June 2006]

Tier I banks
1. Barclays Kshs. 136.54 billion in assets ($1.95 billion) (up 21% from June 2006)
2. Kenya Commercial 96,532 [17%]
3. Standard Chartered 92, 743 [13%]
4. Cooperative 58,712 [3%]
5. CFC /Stanbic 55,534 +
6. National Bank of Kenya 42, 142 [25%]
7 Commercial Bank of Africa 36,217 [10%]
8. Citibank Kenya 36,147 [8%]
9. Equity 29,888 [116%]
– CFC 27,926 [25%]
– Stanbic 27, 608 [62%]
10. NIC 27,583 [22%]

Tier 2 banks
11. Investment & Mortgages 24,494 ($349 million) [19%]
12. Diamond Trust 24, 484 [37%]
13. Baroda13,253 [24%]
14. Imperial 11,039 [30%]
15. Prime 10,773 [25%]
16. Housing Finance 9,665 [-2%]
17. Bank of India 9,552 [21%]
18. EABS 9,049 [5%]
19. Fina 7,688 [25%]
20. Bank of Africa 7,347 [26%]
21. Family Finance 6,698 [73%]
22. K-Rep 6,358 [43%]

Tier 3 banks
23. Habib AG Zurich 5,393 ($77 million) [5%]
24. Giro 5,317 [3%]
25. ABC 5,282 [10%]
26. Guardian 4,970 [2%]
27. Chase 4,826 [74%]
28. Southern Credit 4,581 [8%]
29. Victoria 4,081 [2%]
30. Consolidated 4,001 [28%]
31. Development Bank of Kenya (DBK) 3,876 [35%]
32. Equatorial 3,832 [5%]
33. Habib Bank 3,485 [10%]
34. Middle East 3,309 [-9%]
35. Credit 2,963 [5%]
36. Fidelity 2,779 [43%]
37. Transnational 2,720 [24%]
38. Paramount Universal 2,271 [27%]
39. Oriental (formerly Delphis) 1,624 [17%]
40. Dubai 1,437 [26%]
41. City Finance 510
— Charterhouse 3,938
+ Merger, awaiting approval

Asset growth
industry average 24%
Equity 116%
Chase 74%
Family Finance 73%
Stanbic 62%
K-Rep 43%

Profit growth
average 76%
Bank of Africa 825%
Habib bank 467%
Giro 300%
Paramount universal 300%
Fidelity 222%
EABS 200%
Southern credit 186%
Chase 179%
Oriental 115%
Equity 107%

Loan grwoth
average 19%
Equity 785
Family Finance 67%
K-Rep 66%
Diamond Trust 51%
KCB 49%

Deposit growth
average 25%
Equity 111%
Stanbic 95%
Chase 84%
DBK 63%
Family finance 57%

Bank Sold

Name this bank?
The deal of the year brings together Stanbic and CFC Banks merge together and is expected to be finalized next month with only Central bank and CMA approval left.

The combined, but yet to be named, bank will have assets of over 55 billion shillings ($800 million), deposits of 43 billion, loans of 30 billion and a pre tax profit as June 2007 of 934 million ($14 million)

Mzalendo bank account
Commenting on the report on bank charges released this week, The Governor of the Central Bank called for a Mzalendo bank account which would probably be akin to mzansi from South Africa which is a low cost account at several banks (with wide branch networks – e.g. KCB, Equity, Postbank) that has similar features and charges at all the banks

banking is not cheap

A recent report released on the banking sector shoed that banking not cheap is not cheap for most account holders .

This should not be a surprise to the public who read about the bank profits or the authorities who are sent all charges and tariffs by the banks each month

There’s already been grumbling from research firms ho say a local firm could have carried out the survey and some banks who say the report is inaccurate.

Earlier, some advertised banking is unexpectedly not as cheap

Convenient banking

making trades offs as convenient banking is not the same thing as cheap banking

Equity has been the fastest growing bank in the country over the last few years. It has won customers, now 1+ million, and has sent bigger banks banks back to the drawing board to woo & retain their customers.

However, while banking with them may not be cheap for a business, it is convenient, and offers finance and flexibility to an upcoming business. People coming from abroad complain about the cost of making mobile calls here – saying they are expensive. But compared to what? A taxi driver will make a 30 shilling mobile phone call to secure a 2,000 shilling job as his phone is his office.

Same with Equity their low entry minimums suit individuals and start ups. And while some of their charges are rather hefty (3% for ENC and 10% of amount for a temporary overdrafts), as a businesswoman told me today, their quick decision making and the fact that they are the only bank that can offer these facilities to her make them the optimal bank for now. Getting cheques cleared, guarantees, and payments to suppliers matter more to her now, than the cost of these services, and help her build a credit record for the future. Once she is more established,. she will look question the transaction costs and have other banks now wooing her business.

Other banking briefs

According to Africa confidential, Kenya is favored to be the new host country for the African development bank, with Botswana second in the ranking. However Ivory Coast is back in the running following the signing of a peace accord. More on homeless banks.

The CBR Bank rate was lowered from 10 to 8.5%

The Government has commissioned a study to look into the low uptake of youth enterprise fund and agriculture development funds. They are blaming banks for asking borrowers for collateral and 3 month bank statements – terms which were not spelt out in the funds. from an offline story from the East Africa:

CFC Stanbic bank pre –merger comparisons

Diamond Trust acquired a majority shareholding in Diamond Trust in the just concluded rights issue.

Equity Bank
– Looking to enter the money transfer business
– To buy Housing Finance bank – what do the bloggers say?

Family bank got admitted to the CBK bank clearing house earlier in June, just a few weeks after being licensed. Family took advantage and pressed for an exemption (on a two year waiting period), similar to that granted to Equity Bank when it also became a bank. from an offline story from the standard

National Bank is seeking to commit Ketan Somaia to civil jail over a 17 million debt

Pyramids schemes continue to
thrive despite numerous warnings. However, some schemes feeling a cash pinch are passing the blame to the central bank who are limiting the interest they can pay depositors to 10% p.a. – before they were paying over 10% per month.