Category Archives: Covid19

Absa Kenya resumes dividends after record FY2021

Banking seems to have gotten over the shocks of the last two years, going by the outlook of Absa Bank Kenya. The bank released its 2021 financial results in Nairobi today and signalled a recovery with a resumption of dividend payouts similar to pre-Covid times.

The bank recorded assets of Kshs 429 billion and pre-tax profit of Kshs 15.6 billion for 2021, up from Kshs 5.6 billion in the previous year. Its deposits of Kshs 269 billion and loans of Kshs 234 billion had grown by 6% and 12% respectively. Absa Kenya will pay a dividend of Kshs 1.1 per share to its shareholders, equivalent to a sum of Kshs 6 billion or 58% of its profits. This comes after a dividend freeze last year in which the bank had rescheduled 30% of its loan book to accommodate its customers whose business and lives had been affected by the Covid-19 trade disruptions.

Absa Kenya Managing Director, Jeremy Awori said that 95% of the rescheduled borrowers had since resumed making loan repayments and the bank was able to lend another Kshs 128 billion in 2021.

The bank grew income by 7% to Kshs 37 billion and impairments decreased by 48% to Kshs 4.7 billion. The results were booked without the weighty exceptional items as it has completed the separation, rebranding and transition exercise from Barclays Kenya to Absa Kenya.

Chief Financial Officer, Yusuf Omari said the bank had strong capital and liquidity ratios and was in a good position for 2022 and onwards. He added that the capital position is stronger than in pre-Covid times, and the bank’s bad debt ratio is now at 7.8% compared to the Kenya banking sector average of 13%.

Awori said that the country’s GDP was on the rebound and services, notably tourism, were expected to recover with the removal of travel and quarantine restrictions that had kept business people, tourists and other nationals from visiting the country. There was however caution given the ongoing conflict in Ukraine following the invasion by Russia and which is expected to drive up food and fuel prices across the globe.

Chief Strategy Officer, Moses Muthui said that the last five years had been about growing revenue, driving transformation and bringing down costs. He added that with the separation done, Absa could focus on further diversifying its retail products, growing business banking, and building a regional powerhouse in corporate and institutional banking.

Absa Kenya rebounds from Covid hit

As the wave of quarterly financial results by Kenyan banks stream in this month, the banking industry appears to have recovered from the early effects of the Covid-19 pandemic. 

Absa Bank, Kenya’s fifth-largest bank with assets of Kshs 398 billion ($3.6 billion), released its results, showing a 5x growth in pre-tax profits in the half-year, from 1.6 billion last June to 8.0 billion in June 2021. In the half-year period,  it made provisions of Kshs 1.9 billion compared to Kshs 5.3 billion last June. Overall, loans have grown from Kshs 202 to 219 billion (8%) while deposits have grown from Kshs 249 to 264 billion, representing a loan-to-deposit ratio of 83%. 

The banking industry made many responses to Covid-19, including reducing digital bank charges and restructuring customer loans. Absa restructured 59,000 loans worth Kshs 62 billion, representing 30% of its balance sheet. Absa Kenya’s Managing Director, Jeremy Awori, said it had been a good initiative to work with customers as, by June 2021, 94% of the loans have resumed repayments and the bank’s non-performing asset levels were down to below the industry average of 14%. 

In the last seven years, the bank had doubled the size of its balance sheet, navigated the re-branding from Barclays to Absa, and brought down its cost to income ratio from 53% to 45%.

Absa will optimize costs through technology to improve banking services. In 2021, it will invest Kshs 1.6 billion in technology initiatives; they have already launched WhatsApp banking and will upgrade the Timiza digital banking platform, expand agency banking, automate securities trading and increase cash deposit ATMs and rollout of contactless cards. 

Going forward, Absa Kenya management expects that, with the built-up strong capital and liquidity, the bank will be in a good position to pay a dividend to the shareholders at the end of the year which they missed last year.

AfDB 2021 annual meetings

The African Development Bank Group (AfDB) has announced its series of annual meetings for 2021.

The theme of the annual meetings which will take place from June 23-25 is “building resilient economies in post-covid Africa” and will include the 56th annual meeting of the governors of the African Development Bank and the 47th one of the African Development Fund. The 81 governors of the bank will review the annual report and operations of the group and adopt key resolutions with a focus on inclusive growth, debt and governance.

Just like in 2020, the meetings will be held virtually due to the ongoing Covid-19 situation in which the prescribed mitigation measures are restricted gatherings and travels.

Most dialogue sessions will be restricted to only the governors and bank officials, but there will be some” knowledge events” that are open to the public such as on climate change and building Africa’s health defences.

EDIT: Also during the annual meetings will be the 2021 African Banker Awards with the two main ones being the African Bank of the Year Award (contested by Afreximbank, Attijariwafa, Banque Centrale Populaire, Commercial International Bank, Equity Group Holdings, Standard Bank Group, Trade and Development Bank and Zenith Bank) and the African Banker of the Year between Ade Ayeyemi of Ecobank Transnational Admassu Tadesse (TDB), Brehima Amadou Haidara (Banque de Développement du Mali), Herbert Wigwe (Access Bank), James Mwangi of Equity Group, João Figueiredo – (MozaBanco), and Kennedy Uzoka of United Bank for Africa.

Also Innovation in Financial Services Award, Financial Inclusion Award, Sustainable Bank, SME Bank, Investment Bank (with nominees Absa EFG Hermes, FBNQuest, Misr Capital, and  Standard Bank of South Africa. There is also the Energy Deal of the Year Award, Debt Deal of the Year (which includes Dangote Cement PLC $208 million bond by FBNQuest), and Agriculture Deal of the Year which has nominees from Banque Misr, Standard Bank Group, Nedbank, Stanbic IBTC Capital and, Afreximbank.

Some of the other nominees of include the Equity Deal of the Year Award, which has the Acorn Holdings student accommodation bond/REIT by Renaissance Capital, Infrastructure Deal of the Year in which TDB is nominated for both Kigali’s King Faisal Hospital and Tanzania’s Standard Gauge Railway.

Safaricom’s Ethiopia License Bid

This week marked the deadline for bids for two new Ethiopia telecommunication licenses on April 26. Two offers were received in Addis Ababa; one by MTN (Mauritius) and the other for a “Global Partnership for Ethiopia”, a consortium by Vodafone, Vodacom, Sumitomo and Safaricom.

This is part of an overdue privatization push by Ethiopia that has continued even as political tensions have flared up in different parts of the country. The licenses do not include mobile money, but that is something that currently monopoly, Ethio Telecom has been granted and hopes to launch soon. It is expected that others who did not bid for mobile licenses such as Orange may bid for the partial privatization of Ethio Telecom which has 50 million subscribers.

Can Safaricom grow in this market 110 million population strong-market? That has been a goal of Safaricom’s management for the last few years. But a January 2021 report by Citi Bank was negative on the “high risk, high return” venture which will impact Safaricom’s earnings in the short to medium term. This was due to the impact of Covid-19 on the risk profile of all potential investors in Ethiopia, but also as, by taking a controlling stake in the consortium, the Ethiopia operations will be consolidated in Safaricom’s financials. Citi expects that Safaricom would raise half a billion dollars of debt to contribute to the consortium which would put an end to special dividends paid by the firm.

After technical and financial evaluations of the two qualified bids, a decision is expected by mid-May 2021.

Also, see more about MTN, from their Nigeria listing.

EDIT May 24, 2021:

  • The Global Partnership for Ethiopia welcomed the award of a license to operate telecom services in Ethiopia. Safaricom is the lead partner in the consortium which will establish a new company in Ethiopia that aims to start providing telecommunications services from 2022. The country has 112 million people and is introducing competition as part of economic reforms supported by the International Finance Corporation.

EDIT May 25, 2021:

  • The consortium bid $850 million and will get a 15-year license, with the possibility of one extension of the same duration. Safaricom has incorporated an SPV, the Vodafone Ethiopia Holding Company in the UK, in which it owns 90% and Vodacom 10% – which will own a company in the Netherlands, that it intends to move to Kenya, and get shareholder approval at their upcoming AGM, to operate it as a subsidiary. The SPV will own 61.9% (Safaricom 55.7%, Vodacom 6.2%), and other shareholders will be Sumitomo (27.2%) and CDC (10.9%).

EDIT June 8, 2021:

  • Vodacom CEO Shameel Joosub said their group serves 180 million in Africa with 58 million accessing financial services on M-Pesa, Africa’s largest mobile money platform that processes $24.5 billion a month. It has now expanded to international money transfers, loans, savings and lifestyles ad lifestyle and could be used to enable small Ethiopian businesses to access e-commerce. Also, the launch of mobile money services in 2022 will ensure financial inclusion and close the gender gap.
  • Prime Minister Abiy Ahmed Ali said Ethiopia will next offer 40% of Ethio Telecom to a foreign investor with another 5% to the Ethiopian public. Also, they will adjust policy (mobile money) and re-tender the second national telco license as he called on all the telco players to coordinate to connect everyone.

EDIT July 5, 2021

  • Safaricom appointed a new Managing Director for Ethiopia, Anwar Soussa.
  • Safaricom released the notice for the AGM on July 30 where shareholders will be asked ratify the Ethiopia deals.

EDIT July 15: The Ethiopian Communications Authority (ECA) issued a fifteen-year telecommunications operator license to “Safaricom Ethiopia PLC,” a newly incorporated local company.

Equity Bank’s War Chest

Equity Bank has been on a tear, signing deals with other banks for affordable lines of credit for on-lending. The latest ones are with the African Development Bank and FMO.

The recent financing agreements include:

In 2020:

  • September 2020: $50 million (Kshs 5.5 Billion) loan facility with the IFC.
  • October 2020: $100 Million from Proparco (Agence Française de Développement Group) to enable Kenya MSMEs, women entrepreneurs who had been particularly affected by the economic shock of the COVID-19 crisis to create jobs. It is expected to impact 240 MSMEs firms which will create over 5,000 direct and indirect jobs.

In 2021:

  • March 4: EUR 125 million (Kshs 16.5 Billion) loan facility signed with the European Investment Bank. The long-term loan will support Equity customer to sustain and scale their operations, with Kshs 6.5 billion to agriculture and Kshs 10 billion to MSMEs.
  • March 10: $100 Million (Kshs 11 Billion) facility with DEG of Germany, CDC Group of the United Kingdom, and FMO of the Netherlands to support MSMEs cope with COVID-19 over three years.
  • March 15: USD 75 Million (Kshs 8.25 Billion) loan facility with the African Guaranty Fund to lend to women-owned and managed micro, small and medium-sized enterprises in Kenya, Uganda, Rwanda and DRC.
  • March 23: $10 billion (Kshs 11 billion) from the African Development Bank to support its expansion into Central Africa. The  tier-two facility with a 7-year maturity is also to support lending to women and youth entrepreneurs access capital to recover and thrive in a post-COVID environment.
  • March 25: $50 million (KShs 5.5 billion) NASIRA loan portfolio guarantee from Netherlands FMO, covering loans provided to MSMEs affected by the COVID-19 crisis, including women and young entrepreneurs and companies in the agri-value chain.