Category Archives: City Finance

Top Kenyan banking stories of 2011

Agency Banking took banking to your neighbourhood as kiosks became a bank – pioneered by Equity Bank, and followed by KCB (Mtaani) and Co-Op (Jirani) – mainly enabling cash deposits and withdrawals. Read more.

Cheque Truncation promised so much in new, more secure cheques, that would take a 1-2 days to clear compared to the current one week (four working days). However the launch was put off by a delay in printing of new cheques at several banks, and when the program rolled out a few months later, cheques resembled the old ones, and still cleared at the same old pace.

Fraud: There was increasing fraud reported as a result of faster, easier, banking through real time gross settlements and mobile banking, and there were more tales of thieves being arrested with dozen’s of skimmed ATM cards –
– so watch your statements every month

Mobile Partnerships: Banks surrendered on making customers use their own platforms for mobile banking, and instead opted to partner with Safaricom’s M-pesa. In 2011, there were 8 banks that account holders could move money from their bank accounts to M-pesa and back – and these included large banks like Barclays, Co-Op, Equity and KCB. Also electronic banking is now dead as a premium products, and many of the same banks now have these as a free addition to their customers, saving them from the expense of having to print and mail statements to customers.

Super Profits: Did banks profit from the Central Bank’s mismanagement of rates leading to weaker exchange rates? The Central Bank Governor said five banks did, but then refused to say who they were. Parliament continued to push and came up with a list, but could not prove the claims that the banks made super profits at the expense of the shilling.

Executive Suites: Management changes at KCB resulted in top managers leaving the bank – and moving to rivals like Family Bank and Jamii Bora where they cut equity based compensation deals based on performance (modeled after the Co-Op one of a few years ago).

Interest Rate Hike: Late in the year, there was an about turn in the monetary policy – to rescue the Kenya shilling that, and this came in the form of cut back in liquidity. From that, banks drastically raised their loan rates e.g. Mortgages at Equity bank went from 14% to 25% and many banks offered new loans at +30%. To stave off defaults, some banks held their existing loan rates steady, but with extensions of loan maturity periods. The Kenya Banker’s Association then proposed other measures (PDF) such as limiting repayment rate hikes, not penalizing early payers and (unlikely) asking banks to absorb costs!

Bank to acquire micro-financier

Trying to fathom how or why Kenya’s smallest commercial bank City Finance would be interested in acquiring micro-financier Jamii Bora which has over 170,000 members.

let’s merge

Nevertheless the Kenya Finance Minister has cleared the way for the deal to go through with Jamii Bora who are in the money, having recently repaid Acumen Fund their $250,000 loan (~Kshs 19 million) and completed a substantial portion of their housing project in Kitengela.

Bank Review ‘07: Part 1

the bottom 5

The low end of the banking sector showed little growth in loans or deposits – bank sizes are stagnant.

40. City Finance: (last year 42) Estimated assets of 650 million shillings ($9.28 million) and loss of 20 million shillings in 2007. Kenya’s smallest bank was taken over by the Baraka Fund late in the year, and is expected to be recapitalized and turned around from 2008.

39. (41) Dubai: Estimated 1,480 million assets, profit of 10m shillings.
Growth of about 3% this year, but the bank will have achieve a smaller profit than last year. Its niche branch in Eastleigh and foreign remittance product has found increased competition.

38. (40) Oriental: Estimated 1,732m in assets and profit of 200 million. The perennial loss making Oriental bank (formerly BCCI and Delphis) was recapitalized and is on track for a profit this year following a payment from the Governments’ financial restructuring of Miwani Sugar company which owed the bank a significant debt.

37. (39) Paramount Universal : Estimated 2,258 billion and profit of 45 million. Growth in assets, deposits, and loans flat this year but at least is profitable.

36. (37) Transnational: Estimated 3.03 billion ($43 million) in assets, and 90 million ($1.3m) in profit for 2007. A quiet year for the bank which introduced a Fanikisha product for customers to save money and buy IPO shares on the NSE

Bank story of the week

Which way Equity?: It’s rare to see two sides of a story from the same editorial team – but it has happened on the controversial shielding of Equity Bank’s new shareholders with the Nation newspaper editorial defending the exemption granted by the Finance Minister, after the influential Business Daily editorial (sister newspaper in the Nation Media Group) had strongly opposed the same.