Category Archives: DIB Kenya

5 Kenyan banking stories of 2022 and 2023

2022 in Review 

1. Credit reference shake-up: A failure of banks to carry out proper credit education and to convey the benefits of good repayment to customers, through lower interest rates, caught up with them. This was combined with a tendency to blacklist defaulters at the earliest instance to punish them – and became an issue at political campaigns ahead of the August 2022 election.

The new government set in motion a plan to clear over 4 million borrowers from credit reference bureau blacklists This was in part a 50% waiver on their debt and a window of six months for borrowers to pay the balance of the amount. At the Absa Q3 results briefing, management of the bank explained that there would be no immediate impact as these were loans of people who got stuck in 2020 (during the Covid-19 disruption) that had already been fully provided for

2. CEO suite changes: At Absa Bank Kenya, MD Jeremy Awori left after nine years. He later joined Ecobank Transnational Incorporated, the parent of the Ecobank Group, as the Group CEO replacing Ade Ayeyemi, who retired after attaining the age of 60. Absa Kenya then picked its Chief Financial Officer Yusuf Omari to take over as interim CEO  as  Moses Muthui was made the interim CFO. 

At KCB Joshua Oigara left after nine years and later in the year joined the Standard Bank group as the CEO of Stanbic Kenya and South Sudan, after Charles Mudiwa retired after two decades. KCB appointed Paul Russo, who was MD of their National Bank subsidiary as the new KCB Group Chief Executive Officer. Following that, KCB now has Anastacia Kimtai as the acting KCB Kenya MD and Peter Kioko as the acting MD of National Bank of Kenya

At the I&M Group, the CEO of I&M Bank Kenya Kihara Maina moved on to be the group’s regional CEO, taking over from Chris Low, and the new Kenya MD is Gul Khan who joined from Airtel Money Africa. 

Cooperative and Diamond Trust and Equity banks still retain their long-serving leadership though, at Equity, Polycarp Igathe stepped down as Chief Commercial Officer to contest for the Nairobi Governor seat in the August 2022 elections. edit And from Mwango Capital, we learn of more leadership changes at banks with Sam Muturi joining as Consolidated Bank’s new CEO and Anuj Mediratta as CEO of Gulf African Bank with Helen Chepkwony as the acting CEO of the Kenya Deposit Insurance Corporation (KDIC). Also, Shelter Afrique had another executive change with Thierno-Habib Hann stepping in as the new MD/CEO, replacing Kingsley Muwowo, the CFO, who had been the interim boss. Another change saw Rose Kagucia become the Acting CEO/Managing Director at Dubai Islamic Bank, replacing Peter Makau.

3. Capital raising and arranged marriages: Banks set out to raise new capital in different ways. Larger banks with foreign links like Absa can attract Tier II funding at low rates (of about 3%) which is lower than the cost of deposits or the bond markets (about 9%). Smaller banks arranged sales like Spire to Equity and Sidian to Access while deposit-taking microfinance banks found fintech partners. Key Microfinance is now LOLC Kenya, UMBA, a Delaware fintech bought 66% of Daraja Microfinance Bank, Century Microfinance became Branch Microfinance Bank and Uwezo Microfinance is now Salaam Microfinance Bank. 

4. Green finance is in: Banks report on it and the Kenya Bankers Association published sustainable finance guidelines and principles for banks to align their processes and products (including loans) and the Central Bank has guidelines on climate risk management. Banks are now attracting “green finance” and touting their green credentials joining new green alliances and measuring their activities such as tree planting and reducing their carbon footprints. 

5. Resurgence of the bank branch” Co-Op, Diamond Trust, Family, and NCBA bucked the branch closure trend to show that digital growth needs a physical presence to support it. 

Outlook for 2023

1. Go Big in Ethiopia: Following Safaricom’s big entry into Ethiopia, will banks now follow into the next big African market African after DRC that has delivered big for Equity? Kenyan bank support new partners of the telco that can lead to other businesses in the country that need to unlock financing – and take on the local giant Commercial Bank of Ethiopia (27th largest in Africa), which is not growing its assets now with currency restrictions and a prolonged war. The entry path for foreign banks is now set and KCB, Equity and Stanbic are among the dozen foreign bank that have had representative offices in the country for a few years.

2. Will digital bank customers stick around? January 1 sees a return of several bank charges that were waived in March 2020 at the start of the Covid-19 wave to enable bank customers to make digital and contactless payments. Many tried out digital services offered by their banks for the first time as they were now free of charge. Non-funded income is key for bank profits, but it will be seen how the return of bank and mobile payments/transfer charges will be received by customers are different banks. In this economy, customers are more cost-conscious than ever, especially with the government tax on every bank transaction going up to 20% in 2023.  

3. New savings and investment products that target diaspora, retail and unbanked customers. While lending to the “hustler” economy is well-documented, digital wealth creation and preservation products are still lagging.

Ahead of the much-anticipated IPO’s to come to the Nairobi Securities Exchange, EFG Hermes has invested in a platform for retail investors and this week Acorn got approval for Vuka, a platform for retail investors to into REIT’s.

4. African banks get serious about Nairobi: Access (17th largest in Africa) Ecobank (18) and UBA (25) have all had relatively small footprints in Kenya but now have a chance to grow. Across Africa, there are changes in the banking hierarchy with the largest bank group by asset size for decades, Standard Bank of South Africa with a sluggish home economy about to be passed by the National Bank of Egypt 166 billion, as Egypt Bank Misr has also passed SA’s Absa group to be number six on the continent. You can also expect a resurgence in West Africa, into East, perhaps by buying more banks, as Access is with its second bank deal (for Sidian) to leap up the Kenya asset ranks which are led by Equity (37th in Africa) and KCB (40). edit. However, in January 2023, Centum Investments cancelled the agreement to sell its 83.4% stake in Sidian Bank to Access Bank.

edit Jan 27, 2023.

5. The year is expected to usher in a new regime at the Central Bank of Kenya with a new Governor, Deputy (2 positions) and Chairman by June 2023. The current cabinet Secretary of the National Treasury (i.e. the Finance Minister) is himself a former CBK governor. 

Bank Rankings 2018 Part II: New Entrants

Following an earlier ranking of the top banks based on their asset size at the beginning of the year, what are Kenya’s top banks likely to be, nominally based on asset size at the end of the year? In 2018, Interest rate caps and IFRS9 have had an impact on bank performance while the departures of Imperial and Chase banks were announced.

Ranking using September 2018 numbers 

1. KCB Group – Kenya bank assets of Kshs 594 billion assets (and group assets of Kshs 684 billion).

2. Equity – Kenya bank assets of Kshs 424 billion (and group assets of Kshs 560 billion).

* 3 CBA/NIC – combined assets of Kshs 425 billion (as at September 2018) – if an announced merger deal is approved and completed. CBA and NIC are ranked 9 and 10 by assets, and will leap-frog Cooperative Bank, Barclays Kenya, Diamond Trust, Standard Chartered Kenya, Stanbic and Investment & Mortgages (I&M) banks.

4. Co-op Bank Kenya – asses of Kshs 398 billion.

Other new and interesting bank changes this year; 

12.  State-owned National Bank is in search of a shareholder deal to boost capital.

15.  SBM Kenya. The State Bank of Mauritius completed a carve-out and rebranding of assets, staff, branches and customers of Chase Bank in August. For the third quarter of 2018, it reported assets of Kshs 75.5 billion up from 11.7 billion in January 2018. It now has customer loans of Kshs 12.4 billion, customer deposits of Kshs 53.6 billion, and government securities of Kshs 34.8 billion. SBM entered Kenya two years ago by taking over Fidelity Bank that had assets of Kshs 15 billion in 2015 for just $1. KCB also is expected to conclude a takeover deal for collapsed Imperial Bank in 2019.

39. Mayfair Bank was licensed to operate in June 2017 and began operations later in August. Mayfair now has Kshs 5.3 billion in assets and operates three branches in Nairobi and Mombasa.

41 Dubai Islamic Bank – Kenya (DIB Kenya) with Kshs 4.1 billion in assets was licensed in April 2017. It, is the third Shariah-only bank in Kenya, after Gulf African (No. 23 with Kshs 32 billion of assets) and First Community (No. 31 with Kshs 16 billion assets). DIB Kenya is a fully-owned subsidiary of Dubai Islamic Bank which is one of the largest Islamic banks in the world.

$1 = Kshs 102.

DIB Bank starts in Kenya

DIB Bank Kenya has officially commenced operations with services at three new branches – two in Nairobi (Westlands, Upper Hill) and one in Mombasa (Kilindini). It is a subsidiary of Dubai Islamic Bank, the largest Islamic bank in the UAE with $50 billion in assets

Kenya has two other fully Shariah banks – Gulf African and First Community who have been operating for just over a decade now. Other large banks also offer Shariah/ Islamic banking products and services including  Barclays, KCB, and also at Chase Bank.

There are also insurance companies, and recently financial products like ETF’s and bonds that are Shariah compliant.

DIB has no relationship or association with Dubai Bank Kenya that was placed into liquidation by the Central Bank of Kenya in 2015.