Category Archives: CFCStanbic

Banks Yield (Capping Kenya Bank Interest Rates Part V)

Yesterday, CFC Stanbic became the first bank to extend the capping of interest rate loans to apply to existing loans.

While most banks had announced they would adjust loan rates for new facilities to a maximum of 14.5%, they were waiting to see what the Central Bank (CBK) would say about existing facilities.

But within the space of a few hours,  the Kenya Bankers Association announced this was extended to existing facilities. Other banks like Cooperatie Bank, KCB Group, and Diamond Trust also announced the extension of the new rate cap to existing loans and (edit) Barclays too.

difference in loan repayment

“…Consequently, the KBA wishes to announce that its members have agreed to prospectively reprice existing loans, which will see existing customers enjoy the benefits of the new law once it is operationalised. Each KBA member bank will therefore notify their customers on the process and new terms as the industry engages with CBK on the implementation.”

The big banks are leading, but there’s still silence from a few large ones (Barclays, Equity) and most of the smaller ones, except Transnational and (edit) GT Bank. KCB also clarified that the new interest rates do not affect mobile (phone) loans.  i.e m-pesa loans

The reduction in loan interest rates will mainly have the effect of enabling people to pay off their loans faster than originally scheduled. The above banks have all invited their loan customers to visit branches to discuss the repricing of loans. New loan agreements will have to be drawn if they choose to adjust their loans, as some banks had issued fixed rate loans. Loan installments may or may not change, and the difference will depend on the size of the original loan.

Kenya Bank Rankings 2015: Part I

Ranked by assets (and placing in 2014)

1 (1) KCB [Assets of Kshs 467 billion ($4.59 billion), and profits of Kshs 23.44 billion ($230 million)]

2 (3) Equity Bank

3 (2) Cooperative

4 (4) Barclays

5 (5) Standard Chartered

6 (7) CFC Stanbic Bank

7 (6) Commercial Bank of Africa

8 (8) Diamond Trust

9 (10) NIC

10 (9) Investment & Mortgages

==

Two banks in the news over their FY 2015 results

11 (12) Chase: Assets of Kshs 143 billion ($1.4 billion), and a pre-tax loss of Kshs 1.1 billion ($10.8 million)

12 (11) National: Assets of Kshs 125 billion $1.22 billion) and a pre-tax loss of Kshs 1.68 billion ($16.5 million)

$1 = Kshs 102

 

Stanlib Fahari REIT IPO Results

This week,  Stanlib released the results of the Fahari REIT IPO offer that was launched in October.

They had aimed to raise between Kshs 2.6 billion and Kshs, 12.5 billion, but Kenya’s first REIT grossed Kshs 3.6 billion (29% uptake) – after expenses of Kshs 174 million,  and netted Kshs 3.44 billion.

East Africa institutions (QII) applied for and received 105 million units worth Kshs 2.1 billion (58%), foreign investors applied for and got 45 million units worth Kshs 899 million (25%), and East African retail investors applied for and received 30.8 million units worth Kshs 617 million (17%).

The allocation policy in the event of an over-subscription was to be for 55% for QII, retail would get 25%, and foreign investors 20%. But it’s not clear if the Kshs 1.5 billion ($15M investment by the IFC) committed has been factored in, or if it will come later.

The low uptake would be considered disappointing but for a few factors. First REIT’s are a new exotic product at the Nairobi Securities Exchange (who are also planning to roll out derivatives) and REIT returns are not widely understood by investors. Second, this is a time of high interest rates for competing government securities that are still wildly oversubscribed, and third is that investors may still have overhang from the Imperial Bank shut down – which may continue to affect subsequent attempts to raise cash from the public – such as from company rights issues or commercial bank bonds.

Stanlib are expected to use the funds to complete the purchase of a Nairobi mall

EDIT: The IFC ended up investing $6.7 million (Sh684 million) to match the other investors, which is less than half the $15 million (Sh1.53 billion) it was proposing to invest in Stanlib Investment Fahari Income-Reit. (Via Business Daily

STANLIB Fahari Income REIT Launched

This week, Stanlib Kenya launched the country’s first real estate investment trust – the Fahari I-REIT.

They are aiming to raise Ksh 12.5 billion from 625,000 individual. The investors will gain from eligible real estate investments owned by Stanlib Fahari I-Reit – who will invest in properties that have commercial leases and have a portfolio mix of 75% in property and 25% in cash. I-Reit’s are required to distribute a minimum  80% profit after tax excluding fair value gains.

Quick Notes

  • Minimum is 1,000 units at Kshs 20 each so Kshs 20,000
  • Opens 22 October, Closes 12 November, 2015
  • Allotment to be done on 16 November: Plan is for 343,750 units (55%) to qualified institutional investors, East Africa retail and foreign retail 156,250 units (25%) and foreign institutions (20%)
  • It is close ended and will trade on the exchange (NSE)
  • Besides Stanlib Kenya, others authorized Reit managers include Centum Asset Managers, UAP Investment, CIC Asset Management, Fusion Investment Management and ICEA Lion Asset Management. REIT Trustees are Housing Finance Company, Co–operative Bank and Kenya Commercial Bank.
  • Also, the government recently exempted property transferred into a Reit from paying stamp duty till after 2022.
  • Stanlib announced they will buy a Nairobi mall with the cash.

Countdown to REIT’s in Kenya

This week CFCLIfe and Stanlib managers held a media briefing on Real Estate Investment Trusts (REIT’s) in Kenya and their possible impact on the local property scene.  REIT’s are common around the world, South Africa, Ghana, Nigeria have had legislation for them, and finally, there’s a Kenya law on REIT’s in place (July 2013) after many years of formulation and review.

 Stanlib Kenya  plan to launch REIT’s in Kenya in September 2014 – and the law allows for two kinds – Income REIT’s (I-REIT) and Development REIT’s (D-REIT). Some unique features about REIT’s (which will cost between Kshs 100 – 300 million to set up with a minimum of 7 promoters) include they must distribute about 80% of profits to investors, and investors can sign on to I-REIT’s for as low as Kshs 5,000.

The speakers noted that many large landlords in Kenya are quite comfortable earning incomes of less than 5% on their assets, when they could be earning quite a bit more (10% – 20%) by signing up with REIT’s – which are tax exempt and offer diversification (can invest in strong properties prisons, hospitals, malls) with more liquidity for all investors who participate in the REIT. While there’s saturation as the high end of the property market, and expensive land prices are still climbing,  there are still great opportunities at the mid- and lower- residential and commercial income segments. Also the Kenya UN classification was upgraded which means that from a previous 45, over 180 countries will now have officials accredited to the UN living in Nairobi. 

Also licensed as REIT managers alongside Stanlib in April, were CIC Assets and Fusion Investments.

Answers to ColdTusker’s questions

  • The minimum amount of initial assets for an D-Reit is 100M and for a I-Reit is Kshs 300M
  • D-REIT in the act is defined as “a development and construction real estate investment trust” is for sophisticated investors e.g for property developers to put up properties. They have shorter lifespans – and YES they can convert to I-Reit’s which are for income from established properties. D-Reit’s can borrow up to 50% of assets, and i-Reit’s only 35%, also i-Reit’s must have 75% of portfolio in properties, and D-Reits have to have sunk 30% of their funds into property within year 1 
  • Centum 2 Rivers was mentioned as the planned largest mall in Eastern Africa – with Carrefour as an anchor along with other foreign shops as main tenants (not the usual local supermarket and shops in the stores)..interesting as Carrefour seems to be withdrawing from emerging markets –  http://qz.com/231405/carrefours-india-exit-has-little-to-do-with-the-governments-reservations-on-retail/