Category Archives: Family Finance

Family Bank to raise Notes

A few weeks after retiring a bond issue e early, Family Bank has launched a new medium-term notes (MTN) program.

Family Bank has got approval from the Capital Markets Authority (CMA) to borrow up to Kshs 8 billion over the next five years to go towards growing its capital base, launch new products, and support lending mainly to MSME’s (micro, small, medium enterprises) . The first tranche will be Kshs 4 billion. 

This announcement is a welcome sign for the Nairobi corporate bond scene that has been shrinking for the last few years. Last week East African Breweries (EABL) announced it was retiring its bond program, and earlier, in April 2021, Family Bank had paid back Kshs 2 billion to its noteholders – concluding a Kshs 10 billion borrowing multi-currency program of fixed and floating rate bonds that it had launched in 2015.   

CEO Rebecca Mbithi said she was confident of the bank’s upward trajectory as Family is the fourth largest bank in the country by branch network, with 92 branches. The bank has recorded net compounded growth of profit-after-tax of 21% in the last five years, with assets growing annually by 7% and deposits by 14%. In the first quarter of 2021, it had a 71% increase compared to its earnings last year. 

Transaction advisors for the MTN program are NCBA Investment Bank and Genghis Capital. Other partners are PricewaterhouseCoopers (reporting accountants), MTC (note trustees), Mboya Wangong’u & Waiyaki (legal)  and Tim-Sky Media (PR). 

EDIT June 8: Family Bank Bond details are out.

  • The first tranche aims to raise Kshs 3 billion (about $27.8 million) in Kenya shillings or other currencies, with a 1 billion green-shoe option.
  • Maturity is 5.5 years.
  • The rate is fixed at 13% p.a. or floating (at the T-bill ±2.5%).
  • Funds may be used to expand branches, for on-lending, ICT investments, capital strengthening or regional markets entry.
  • Bond opens on 8 June, closes on 22 June,
  • The minimum investment amount is Kshs 100,000 (about $927)
  • Interest payments will be twice a year.
  • Bonds will be listed at the NSE from June 2021 to December 2026.

EDIT: June 24: The first tranche of the notes was fully subscribed and attracted bids for Kshs 4.41 billion. Family Bank was then granted approval by the CMA to exercise a green shoe option for Kshs 1 billion above Kshs 3 billion tranche size.

The entire first note tranche will pay investors at a fixed rate of 13%, paid semi-annually and will be listed on the Nairobi Securities Exchange on June 30, 2021.

EDIT June 30: Trading of the first tranche of Family Bank bonds at the Nairobi Securities Exchange (NSE) started this morning.

Bank Chairman, Wilfred Kiboro reiterated that Family plans to list its shares on the NSE and that activities like the successful bond listing, which raised Kshs 4.42 billion from investors, will increase the attractiveness of the bank.

Sustainable Finance by Kenyan Bankers

The Kenya Bankers Association (KBA) launched a report on the progress towards the implementation of sustainable finance in decision-making at Kenyan banks.

The KBA houses a Sustainable Finance Working Group that complies mid-level managers at Kenya banks that champions and promotes sustainable finance principles and practices among Kenyan banks. The report shows that 85% of banks have aligned their credit policies to responsible and sustainable lending practices and 57% of banks have integrated sustainability reports into their financial reporting. The results are based on voluntary disclosures by banks.

KBA also launched a revamped Sustainable Finance Initiative e-learning website that is now Persons With Disability (PWD)-friendly.

Since it was originally launched in 2015, over 99% (33,000 employees) of banking industry staff have received training on how to make more inclusive financial decisions. The bankers are trained on different modules, including on green bonds and with case-studies from other markets. The top-performing banks in SFI e-learning have been NCBA, Bank of Africa, Diamond Trust, I&M, and Sidian banks. Also, bankers can now sign in with user names, as access is no longer based on their email addresses, which created hitches when people learning switched banks.

The new platform has got case foreign and local studies on blue and green finance. Some of the ones cited in the report include the Acorn Green Bond, arranged by Stanbic and guaranteed by GuarantCo, which raised Kshs 4.3 billion for environmentally- friendly student accommodation in Nairobi. Others are CBA’s $2 million lending to M-KOPA, a seller of solar-powered devices to low income, mostly unbanked households, on a pay-to-own instalment basis and Standard Chartered’s Kshs 10 million 3-year loan to assist Uhuru Flower Farms to acquire a solar system to reduce their energy costs and improve the reliability of the power supply.

Also this week, Family Bank joined the United Nations Global Compact network, and became the 4th bank in Kenya to commit to building a sustainable business that adheres to the ten principles of the network.

The KBA sustainability study was done with support from WWF-Kenya which is also supporting the green bonds program in Kenya.

Which way the bank branch?

This month saw Family Bank open a branch in Eastleigh, its 92nd in the country. Family is one of the pioneers of paperless branches and had opened another branch in December near the large Wangige market to serve traders. Eastleigh is an important cog of Kenyan supply chains and is estimated to have the second-highest density of traders, second only to the Nairobi CBD. Despite advances in mobile transfers, small traders are still heavy users of cash for transactions.

Then today Diamond Trust announced the consolidation of six branches that are adjacent to each other: Oval and 9 West (both to Westgate), Eastleigh to Madina Mall, Garden City to TRM mall, Jamhuri Street (to Malindi) and Kago Street (to Eldoret). The bank asked customers to continue using alternative channels while staff will be redeployed to other branches and business units.

We can probably expect to see more branch consolidations or closures as two groups KCB-NBK and NCBA (CBA & NIC) continue to refine their new operating structures. CBA and NIC did some closures last year.

When KCB announced their third-quarter 2020 results, they shared some interesting details about branches and the march to digital. KCB branches did 2% of transactions in Q3 2020 compared to 5% the previous year. Also, there was a 16% decline in transactions done per day by branch tellers from 60 to 50, while customers did 43% fewer transactions (5.8 million compared to 10.2 million) than in the previous year. KCB customers did 77% of their financial transactions on mobile phones, 17% at agents / internet / point of sale (cards), and 4% at ATM’s. More ATM’s now accept cheque deposits, not just cash, and also act as 24-hour M-Pesa agents.

The Central Bank of Kenya’s Supervision Report for 2019 shows KCB with 203 branches, followed by Equity with 171 (and 12 sub-branches), Co-op Bank 152, Absa 107, Family had 92 in 2019, NBK 78, and Diamond Trust 70. Between 2018 and 2019 there was a drop of 16 branches from 1,505 to 1,490 with 7 of them in Nairobi that ended 2019 with 593.  NCBA has 37 branches but serves the largest number of bank customers in Kenya by far, 31 million thanks to M-Shwari, its partnership with Safaricom.

Outside the country, there is growth as Kenyan banks operate 316 branches in the region, up from 207. They are led by Equity that has 44 in DRC and 39 in Uganda,  Equity has a total of 116, followed by Diamond Trust with 68 (36 in Uganda, 28 in Tanzania, 4 in Burundi)  and KCB with 60.

During Covid-19, foot traffic has reduced at malls, offices shopping centres and bank branches. This has also been due to the growth of online shopping that has taken off exponentially, and many facilities now have dedicated desk and parking spaces for motorcycle delivery riders.

No sign yet of banks moving to share branch spaces with each other but there is less need for banks to be on the ground floor of buildings, which is usually more costly. Also, shopping malls tend to have a banking floor (top of Garden City mall) or ATM corner where several bank services are grouped.

African Banker Awards 2019 Nominees

The winners of the 2019 African Banker Awards will be announced on June 11 at the Annual Meetings of the African Development Bank (AfDB) in Malabo, Equatorial Guinea. 

Multiple nominees this year include Absa, the Trade & Development Bank, Equity Bank, and Standard Bank while first-time nominees include Family Bank of Kenya who partnered with Simba Pay to enable payments via WeChat to China, Kenya’s largest trading partner. There are also nominees for arranging sovereign Eurobonds and IPO’s, while UbuntuCoin, an asset-backed digital currency that was a finalist at last year’s awards, is nominated again.

The complete list of shortlisted nominees for 2019 are:

African Banker of the Year:  Admassu Tadesse (Trade and Development Bank), Brehima Amadou Haidara (La Banque de Développement du Mali), Brian Kennedy (Nedbank, South Africa), James Mwangi (Equity Bank, Kenya) and Johan Koorts (ABSA, South Africa).

Award for Financial Inclusion: 4G Capital (Kenya), Amhara (Ethiopia), Bank of Industry (Nigeria), Cofina (Senegal), Jumo (South Africa).

Best Retail Bank in Africa: Coris (Burkina Faso), Ecobank (ETI), Guarantee Trust Bank (Nigeria), KCB (Kenya), QNB AlAhli (Egypt).

Deal of the Year – Debt: Absa ($350M Old Mutual Renewable Energy IPP), Afrexim – ($500M ChinaExim Syndicated Loan), CIB ($389M Egyptian Refining Company), Rothschild ($2.2 billion Republic of Senegal Dual-Currency Eurobond), TDB ($1 billion Sovereign Loan to the Government of Kenya).

Deal of the Year – Equity:  Al Ahly (Canal Sugar Equity), EFG Hermes (ASA IPO), RenCap (CiplaQCIL IPO), Standard Bank / RMB (Vivo Energy IPO), Standard Bank IBTC (Flour Mills of Nigeria Rights Issue).

Infrastructure Deal of the Year: Absa (Enel Green Power), Afrexim (Syndicated Loan for EBOMAF/Government of Cote D’Ivoire), National Bank of Egypt (ElSewedy Electric Hydropower Project), RNB (Roggeveld Wind Power Project), TDB (Mozambique FLNG Project).

Innovation in Banking:  ABSA (South Africa), Family Bank (Kenya), KCB (Kenya), MCB Capital Markets (Mauritius), and Ubuntu Coin (Côte d’Ivoire).

Investment Bank of the Year: ABSA (South Africa), Coronation Merchant Capital (Nigeria), NedBank (South Africa), Rothschild, Standard Bank (South Africa).

Socially Responsible Bank of the Year: Access Bank (Nigeria), Bank Misr (Egypt), Equity Bank (Kenya), KCB (Kenya), Qalaa Holdings (Egypt).

Bank Roundup: January 2019

The boards of NIC and CBA banks confirmed their plans to go ahead with a merger to create the largest bank in Africa by customer numbers. Serving over 40 million customers in 5 countries, the combined entity will have Kshs 444 billion in assets (~ $4.4 billion).

Currently, they are both at 115 billion of loans and have differences in deposits with 145 billion at NIC to 191 billion at CBA and customer numbers of 142,000 at NIC to 41 million at CBA. They had relatively similar customer numbers prior to CBA’s launch of M-Shwari in partnership with Safaricom. 

Going forward they aim to obtain shareholder approval in Q1, obtain regulatory approval in Q2 and have the new entity commence operations in Q3 of 2019. Currently, NIC has 26,000 shareholders and is listed on the Nairobi Securities Exchange (NSE) while CBA has 34 shareholders (20 individual, 14 corporations) including Enke Investments (24.91%), Ropat Nominees (22.50%), Livingstone Registrars (19.90%) and  Yana Investments (11.14%). The merger will be effected through share swaps that will result in NIC shareholders owning 47% and CBA shareholders 53% of the new entity whose shares will remain listed on the NSE.

MCB in Kenya:  Leading Mauritius Lender MCB Group has officially opened its representative office in Nairobi. The largest and oldest bank in Mauritius, with $12 billion in assets and a presence in nine countries, it had been licensed in Kenya back in 2015 and it will bank on its new office to gauge opportunities in the Kenyan market and build strategic relationships.

The 19th largest bank in Africa by assets, it is listed in Mauritius and has 19,000 shareholders. It has a strategic objective of growing its international footprint and expanding non-bank activities. It has 1 million customers, 3,500 employees and 55 branches but, as it was communicated at the launch, they have no intention of opening branches in Kenya or East Africa.

Ethiopia Bank summary: Asoko Insight gave a summary report of the Ethiopian banking sector, parts of which are only available to subscribers. While some foreign investment is expected in Ethiopia, the banking sector is already privatized with fifteen of the country’s eighteen banks all having private local owners. The state-owned Commercial Bank of Ethiopia is the largest bank in the East Africa region with 1,280 branches and earns 67% of the sector profits in the country.  It has revenue of $1.3 billion, while 11 (other) banks, have revenues of between $50 million and $500 million, suggesting a more concentrated market in terms of size.

Tanzania:  NMB bank has waived several bank charges for their customers from February 1 including account opening, monthly maintenance, transaction fees, dormant account reactivation, and internal transfers – all in a bid to promote financial inclusion in the country.

Meanwhile, several Tanzania banks have a series of new managing directors including NIC Bank, Akiba Commercial Bank and Bank of Africa Tanzania

Family Bank pled guilty in the NYS case:

Diamond Trust CEO questioned.