Category Archives: credit crisis

Kutwa Tuesday: Corporate Mysteries

and other Bank Twits

Twitter is a micro-blogging tool that is really nifty for doing mini-posts, forwards and other remarks that (are on any subject) and are maybe not worthy of a full blog post. Here’s a summary of my week on Twitter where there was some interesting discussions, but so far yet to unravel mysteries at Kenya airways, Safaricom and Athi river mining? and some replies

June 15: nairobbery Reading about a Nairobi scam where people actually throw themselves on the windscreens of slow moving cars and later ask for compensation
Kenya central bank study shows popularity of MPesa; users rate it cheap, fast, reliable & accessible

June 16: Media mystery: what happened to the Bamburi vs. Athi story? there were many reporters there but was story buried? replies @nakeel It’s called the power of advertising and who pays your bills..

June 17: Economist says Africa’s next country South Sudan “will fail before it has even been born”
DT Dobie advertising that a Mercedes E200 kompressor is 1796cc and therefore compliant with new Kenya Government rules for Ministers cars
Anti-corruption initiatives falter around Africa
Racial Discrimination at World Bank?
CNBC TV show President Obama killed a fly during an interview. Take it away FOX
Is the Kenya rugby safari sevens tourney over-priced at 1,500 ($19) per season ticket?
Two new independent (non stockbroker) directors at Nairobi Stock Exchange – NSE Board

June18 KPLC is going to increase the birth rate in kenya if they keep failing to supply electricity.

June 19: Kenya and Uganda Catholic churches in a race to hell with simultaneous abuse scandals; media coverage in UG is NSFW
Michela Wrong to visit the World Bank

June 20 Discovering the mysterys of white cap, EABLs no.2 that survives recessions without any advertising
replies @coldtusker I didn’t say it ‘failed’ but IMHO its core consumer base isn’t GenX but my mzee’s generation. What happened to WC lite? White Cap’s demographics are skewed to stable, older, wealthier, ‘old dogs’ market. It has failed among the ‘younger’ drinkers. @Fintradecapital thats really true. Its drinkers r consistent.
I use nivea creams, but all their posters and adverts scream i am soooò not their target customer!
replies @uhusiano is cos they are all jungus? @coldtusker Are you thinking of doing a chaz bono? re: nivea – not their target market… LOL… @devonwhittle I’m also a Nivea customer, but their “skin whitening” products and ads worry me – @karuoro I use Nivea shower gel but prefer Vaseline lotion..find nivea lotions too..sticky (don’t know if that makes sense) @Ethnicsupplies I’ve never liked the smell @Shiko_Msa we the target customers that is. feel welcome. Even though they dont welcome we do.
Stomping through kilelewshwa – many apartment complexes have ‘to let’ signs

june 21 Safaricom selling cheap internet ready phones including nokia 1680 for $38 replies @alykhansatchu I was reading that @ thinking 13m Subs converts to 2m x $1.00 a day internet
@coldtusker also former Kenya Airways director is CEO air uganda. Seems KQ is now finishing school for sub-saharan airline bosses. replies @coldtusker Hugh Fraser (ex-KQ now CEO of Air Uganda) was in the very important Commercial Director post @ coldtusker Neil Canty (former CFO-KQ) went to Gulf Air though he has left them for another gig. Africa again?

R/T @airlineroute KLM to operate MD11s on Nairobi-amsterdam for Kenya Airways from july to september! What will the 777s be doing?

Unexpected dividend cheque from stanbic uganda ~$15 in the mail today #migingo
replies @PinkM How do you cash your Stanbic UG cheques?I haven’t cashed for 2 years now. Thanks.Will try that. I wish it was possible to bank at CFC Stanbic even for CFC a/c holders

Kenya retain rugby revens title, but Is that DJ CK on pitch with team at #safarisevens? He’s kenya’s top gate crasher replies @kenyanpundit hehehe, DJ CK was EVERYWHERE at the WEF in Capetown @kachwanya you just made me remember almost similar incident sometime back during Orange launch..yeah he somehow did that

June 22 Kenya’ anti-aid author envious of @dambisamoyo
replies @kainvestor Many African anti-aid champions see sinister agendas in the success of @dambisamoyo. She wasn’t the 1st to write against aid >>>
Safaricom shares pick up after managers visit Europe & US fund investment firms #safaricom #investorrelations
Family Bank 25th anniversary
President @mwaikibaki encourages banks to use mobile phones to reach beyond the 22% ‘banked’ kenyans
Have more twitter followers than feedburner subsribers; what does that mean?
people who vandalised the Kenya Railways Kibera railway, may also have got paid to fix it after

June 23 Any well wishers to donate a PC or laptop to Mamamikes who were recently robbed?…
59% of small business owners rely on credit cards for working capital! scary

Reading the Barclays Tea Leaves

Barclays Kenya just published their 2008 annual report; what does some interesting points about the banking sector.

Barclays Peek
– Is the second largest bank in Kenya behind KCB, but still tops in profit – with Kshs 8 billion ($100 million) before tax. Has 126 billion ($1.58 billion) in deposits, loans of 108 billion ($1.35 billion) and total assets of 168.5 billion shillings. It would probably reclaim the number one status from KCB, but KCB shareholders will next month absorb the assets of S&L, their mortgage subsidiary
Shariah Banking Barclays launched La Riba in 2008 – and in 2008 they managed to mobilize over 2 billion in new la riba deposits to stand at 3.3 billion ($41 million) at end of year, but gave out just 19 million in loans
Customers They have a popular Business club – with over 10,000 members some of whom were flown to Dubai, China and Holland. Barclays had 930,000 customers in 2008 (2007 was 580,000) – compared to Equity Bank’s 3.3 million customers, and 60,917 shareholder 60, 917 (up from 58,945 in 07)
Staff cutback? Employees in 2008 reduced by 16% – as group had 5,571 at December 08 compared to 6,900 in December 07. In 06 they had 2,197 (but it appears in 2008, they shed the part time staff whose numbers reduced from 4115 to 1698)
No thanks Agriculture. Agriculture is referred to as the backbone of Kenya’s economy7, but Barclays estimate their exposure to the sector to be just 1% of loans. Private industries account for 44%, with 10% each to manufacturing and to transport & communications sectors.
Asset finance reduced?? Assets under financial lease decreased slightly – still at 6.1 billion
Gloabl crisis / External Impact? a 1% or decrease in interest rates would impact profit about 5%, but there’s no impact from strength/weakness of Kenya shilling (bank only does business in Kenya)
– Directors: the three directors who were appointed at previous times are up for re-election on May 15; Brown Ondengo (2003), Jane karuku (2003), and Paul Phemngorem (1998). Barclays (UK) parent, with 68.5% of the vote, will pretty much determine who will remain or leave the board. No other shareholder has more than 1%, with the next largest being Kenya’s national social security fund (NSSF) with 2%
Cheaper to borrow overseas than the NSE: The bank received subordinated debt in the form of a tranche of NSE listed bonds of 2 billion shillings (3,078b) repayable over 5 years – at 10.36%. They also borrowed 1.25 billion from their Barclays parent; BBK in the form of a 10 year loan at just 2.39%
Pension Funds gloomy outlook The Barclays staff pension scheme with 44% equity investments was down 13% in value (to Kshs 7 billion), compared to a gain of 6% in 07

Barclays and the NIC-ex

A few days after Equity led with their 2008 results next comes Barclays Bank Kenya and NIC Bank.

Barclays Kenya have shrugged off a difficult year to report a slight growth in profits while also admitting a slowdown in lending and shift in plans to consolidate after an expansion period that saw the bank go on an expansion splurge in the last two years. Barclays Kenya 2008 profits (PDF)
– Growth of in assets of 3% every quarter of 2008, except Q4 which had a reduction of 2% to end the year. Overall asset growth in 2008 was 7%, while in 2007 it had been was 34%. Assets at December 31 were Kshs. 168.8 billion ($2.1 billion) compared to 172.3 billion at September 2008
– Deposits grew by 12%, 5%, 3% in first three quarters, followed by a decline 5% in Q4 – and overall up 16% for the year – same as in 2007
– Loans were up 3% from 2007
– Income up 25% compared to 24% in 2007
– Expenses up 33% compare to 37% in 2006
– NPA up 22%
– Despite modest growth, edged past Equity as most the capitalized bank

NIC was spun off from Barclays as an asset finance specialist, a business it still dominates while competing against Barclays itself now. The Bank is still in expansion mode with a rebranding under the 1 bank banner as a one stop shop for all their customers business needs. NIC Bank 2008 profits (PDF)

– In 2008, growth in assets was 36%, including 18% in Q1 (while the country was fighting?) and 8% in q4
– Deposits were 42% up from a year ago, again with 17% in Q1 and 10% in Q4
– Loans were up 35% in 2008, with 9% in Q2 and 14% increase in Q3, followed by just 2% in Q4 the lowest (went big on Q3 and decided to slow down in Q4?). NPA’s still just 4% of loans
– Despite re-branding, income was up 33% with expenses up 25% in 2008
– Profit was up 41% in 2008, compared to 55% in 2007.

KCB overtook the overtook Barclays as the number one bank, a position it should hold, despite the hit it will take from the link with Triton Oil , the collapsed, scandal ridden oil company. Results should be out in a few days.

Conflicting signals – crunch or not?

KCB’s housing subsidiary Savings & Loan (S&L) extended financing to real estate developers this week, increasing lending limits to Kshs. 250 million ($3.12 million) and willingness to finance of 85% of the construction costs of property developments. Some already wonder if they are contributing to a real estate bubble in Kenya.

Meanwhile there was an offline story in the Standard this week where the MD of listed paint maker, Crown Berger, lamented that banks are behaving strangely, reluctant to lend money, and he was now looking to launch a bond to raise working capital funds for the firm.

Profit Warning Friday

KQ Profit warning for Who?
Kenya Airways issued a profit warning a few days after media reports had painted a rather rosy picture of operations at the airline with increased capacity and utilization. (That’s what happens when you release operating results without any shillings or dollar attached.

The fuel price, PEV, and reduced tourism has been well known within the investment community and this did not appear to impact the price until the actual ad and media corrections were carried in the newspaper, perhaps spooking retail investors and the stock is down 22% this week. The operational figures already show that the airline is in turnaround mode and is being hammered when it has already hit the bottom. I need to attend more investor briefings. Neither announcement appeared at the Nairobi Stock Exchange (NSE) website where company quarterly announcements usually run

Profit warning at the NSE
On Thursday, the Capital Markets Authority (regulator) release a brief (copy here ) addressing issues perhaps that should have been said by the NSE. It noted that bear markets do happen (NSE declined 50% between 2000 and 2002), stockbrokers are in trouble (reduced activity, means low turnover and low commission), are restructuring (layoffs and branch closure s), and exposed (risks could arise from fraud. Nevertheless, shares are safe and better left to long-term investors!

We are not rogue this came a day after directors of Suntra Investment Bank, made a similarly candid admission of trouble ”business is so low at the moment that we are actually eating into our own funds” – one of the few times a financial institution has admitted being in difficulty, as they tried to contain damager (a single court case), but which left spooked customers flocking to transfer their shares

Executives on profit

  • Michael Joseph the CEO of Safaricom, Kenya’s most profitable company, launched an unusual rant against the government and business climate saying the first three things an investor needs in Kenya are (1) a generator (ii) a 4WD car (iii) a security firm – before they can even think about making any investment in Kenya. he said they spend 1.5 million euros on diesel and called the new universal service fund tax stupid as the mobile sector is already over-taxed
  • A man who sees no losses on the horizon is the CBK governor, who remains an eternal optimist after launching an infrastructure bond. Kenya plans to raise Kshs. 18.5 billion (~$245 million for roads, electricity generation & distribution) from investors who will pay a minimum investment of Kshs. 100,000 or ~$1,250). 12.5% interest will be paid semi-annually with principal repaid 2015, 2017, 2021. He had earlier commented that global meltdown should not have much impact because Kenya is primarily a rural agro-based economy

What else happening?

  • Kenyan knows Madoff: listed among the hundreds of fabulous fraudster Bernie Madoff’s clients is Sangare Ranch of P O Box 24 Mweiga Kenya Africa
  • Barclays Uganda counters rumours of a collapse/closure
  • Global credit rating of South Africa, previous rate triton high credit ratings of Kenyan companies with collapsed oil firm Triton downgraded to DD, Sasini’s ratings maintained at BBB+ (triple B plus) and A2 (single A two) for the long and short term respectively, and Eveready East Africa Limited downgraded to BBB+ (triple B plus) and A2 (single A two) for the long and short term respectively. Moody have downgraded Toyota today, so who’s safe
  • Fuel shortage was experienced in Nairobi – back and forth between Kenya pipeline company, ministry of energy, oil companies who all absolved themselves for any responsibility; Read more at Coldtusker
  • Who’s the Total Man at the NSE?
  • Mumias profit down 73% to 231 million at the half year on sales of 6.2 billion (down 8%)

Sporting Moment: GTV Out

GTV folds
It has been a bleak weekend for Kenyan sports – Gor Mahia lost 0 – 5 to a visiting team from Rwanda, Zimbabwe has now defeated Kenya four matches in a row in Cricket at Mombasa & Nairobi, but most shocking was the sudden shutdown/collapse of GTV – who for the last two years were the main broadcasters of the English soccer premier league in several African countries.

Their statement attributes the collapse to the ongoing global credit crunch, but their demise seems similar to that of Kirch Media who spent big in the late 90’s to acquire the rights to broadcast two World Cup events and also 100 years of formula one races among other media properties – but who folded shop a few years later in one of Germany’s biggest corporate collapses.

What next? I expect Multi-choice DSTV to step in and pay the liquidators of GTV about 30% and take over their broadcast rights in Africa (and perhaps hike their prices too), while in Kenya, a successful bid for GTV’s soccer rights could also be an opportunity for Wananchi’s Zuku to make a nationwide impact.

Business impact in sports
The local impact of the economic crisis is likely to be replicated in sports.

– The local soccer league did well last year (2008) with private interests participating and sponsoring the teams & competitions – there was huge fan interest, media interest (for once local radio stations actively previewed, reviewed and encouraged attendance of local soccer matches) and a private security firm (G4S) was in charge of the ticketing and match revenue collection.

But will the economic crisis affect things? Will sugar teams like Sony and Chemelil continue to support sports when even the only profitable company in the sector (Mumias) has profits down 80% this year? And what about Sher (Flower) and other small company-sponsored teams?

– The local motoring scene was mainly supported by KCB last year and fortunately, despite the bank’s ongoing problems – particularly with a fellow sponsor (Triton), they have agreed to also sponsor the 2009 rally season. However, the loss of Paris Dakar to South America shows the global nature of sports and that events (like the Safari Rally) can be translocated elsewhere if countries don’t pay attention to details of sports management. in 2009, pressure shifts to South Africa to progressively move nearer the completion of stadiums for the 2010 world cup.

– Rugby continues to be well-organized, attract top-notch sponsors, and the annual Safari Sevens is the premier sports event(party) – with Kenya’s Sevens Team off to participate in the IRB Sevens World Series next weekend.

Bad management
Another problem in Kenya is bad management – and while every sport has behind the scenes ramblings and wrangles, Kenya is no exception with motor sports, cricket and soccer feuds that have long been a distraction for the sports.

Also, all sports go through generational changes – and in the off-season, Athletics Kenya management went through elections that were well contested. However, in Kenya we need to have longevity of athletes, not management officials; it is rare to have someone (except for Catherine Ndereba) participate successfully at more than one Olympic event. Other countries stars like Haile Gebreselassie, Hicham El Guerrouj and Kenenisa Bekele have successfully represented their countries at consecutive Olympics – while in Kenya it is sad that it is mainly the officials who show such endurance – and that people who were ‘in charge’ of sports like soccer in the 1980’s and 90’s are still in charge today (Sammy Obingo, Sam Nyamweya) – and continue to bicker and blame each other for the problems in the sport.

Having recently read Foul, FIFA comes across as a corrupt institution that does not care about individual countries attempts to improve management of their sports affairs – FIFA wants to dictate who will be the local managers of soccer, and no matter how bad or corrupt they are, they are FIFA’s people who should not be interfered with unless a country wants to be suspended from regional or international soccer competitions.

EDIT: Feb 4 2009 – South Africa based DSTV SuperSport channel reclaimed the rights to broadcast live all English premier league matches, including those from collapsed GTV in 22 African countries over the next two seasons