Kenya Airways (KQ) recorded an unsurprising record loss for a year in which Covid-19 saw grounded aircraft and closed airspaces. After the worst year for aviation since 1999, KQ’s Chairman Michael Joseph said he expects that the airline will not recover to pre-Covid growth and revenue levels till about 2023 and will use the period to right-size its fleet, and deal with legacy issues & contracts. A bill currently in Kenya’s Parliament will place the airline in an aviation holding company with the Kenya Airports Authority.
KQ flew 1.8 million passengers, down 66% from 2019, and they were grounded by Covid-19 through the summer which is usually their most-profitable period. For the year, revenue was down 60% to Kshs 52 billion, and while operating costs were down 39%, it still resulted in a loss of Kshs 36.2 billion.
KQ Group MD Allan Kilavuka said the airline has resume flying to routes that are safe and which provide steady revenue (China is their best route but all airlines are restricted to two flights a week). They have also revived cargo, delivering more flowers, food and pharmaceuticals. They added a new cold storage facility (300-ton capacity) and converted a 787 Dreamliner into a preighter (adding 50 tons of capacity). The airline also started a Mombasa – Sharjah cargo flight, resumed weekly cargo ones to Delhi, and in Southern Africa, they obtained 5th freedom rights to operate cargo flights between Johannesburg, Harare, Lilongwe, Dar es Salaam and Maputo.
This year, they will explore partnerships with other airlines (in Africa and Europe) as their joint-venture with KLM comes to an end, by mutual consent, in September 2021. They also plan to convert another aircraft into a preighter and will explore commercial drone operations, after having bought four for training.
Stanbic Kenya bucked the expected trend that banks will by dividend-shy after a year of the Covid-19 and became the first bank to announce their full-year 2020 results, and with an unexpected dividend for shareholders.
During the year, the bank, part of the largest financial group in Africa, set out to support the resilience of their customers, staff and the community. 60% of staff now work from home, and 80% of transactions are done on mobile phones. For customers, they extended moratoriums on Kshs 40 billion of loans, that benefited 7,200 customers, and that included Kshs 3.1 billion to SME’s. They also waived charges on digital transactions and paid out 400 retrenchment insurance policy claims. While the banking industry repayment moratoriums that were set in March 2020 lapsed this month, management, led by Kenya Chief Executive, Charles Mudiwa, said that 80% of Stanbic’s customers had reorganized themselves and resumed repaying their loans by December 2020.
Also, the second half of the year was one of recovery of growth and overall, they managed to grow deposits by 12% to Kshs 217 billion and loans by 4% to Kshs 158 billion, while reducing their cost to income ratio, from 56% to 52%.
Stanbic Kenya’s profit after tax was Kshs 5.2 billion, down 19% from the previous year, but the pre-provision profit was up 2%. The bank will pay shareholders Kshs 3.8 per share for a total payout of Kshs 1.5 billion. This is equivalent to 29% of their earnings, and the bank’s management said that, with its strong capital and liquidity, they should also support Stanbic Kenya’s shareholders. They retain a positive outlook for 2021 even as Covid-19 continues, amid the ongoing distribution of vaccines worldwide.
All data indicates a new age of interest in retail investing. Across the world more people than ever are starting to trade for the first time, with reports of retail participation in the US stock market, for example, increasing from 10% in 2019 to 25% in 2020. Even during a public relations disaster, Robinhood- the U.S retail-focused trading app- onboarded 600k new clients in a single day. Our brokerage, Equiti Group/ FXPesa, saw volumes and client numbers increase by multiples across all our key markets and this will continue through this year.
The pandemic created an environment where people were looking for an income in the safety of their own home and, logically, that trading/ investing answered that need. Anything that brings a heightened awareness of financial literacy is a great thing, but it’s also something that we need to nurture. With millions entering the financial markets for the first time, unfortunately, scams, misinformation and false promises follow, and we must increase consciousness of this.
Social Networks: Most of the world has been following the journey of a supposed war between those on a Reddit forum called r/WallStreetBets and hedge funds betting on the demise of American electronic games supplier GameStop (going ‘short’). This battle was trending on all major social networks, such as Twitter, Facebook, Telegram and Instagram. These networks are powerful, Reddit has 160 million unique visits to its site each month.
People that had never invested before frantically set up trading accounts and placed trades with as much capital as they could put their hands on. Some naïve first-timers often had very little notion of risk or what they were doing, but instead paid full attention to the latest funny meme or influencer that told them that this stock was ‘going to the moon’. It did, and then it came back again leaving a lot of people losing a lot of money.
Ignoring Fundamentals: Social networks and online personalities have an increasing amount of influence over investors. Recently, Elon Musk the CEO of Tesla added 12% to the value of Bitcoin simply by changing his bio to the bitcoin Twitter hashtag. With the wave of memes, online ‘experts’ and celebrities pushing their agendas, the fundamentals of great companies are becoming secondary. We need to acknowledge this and attempt to educate differently.
A perfect example of this was the recent movement in the Silver price. Silver is widely regarded as an undervalued metal, mainly because of its increasing utility in ‘green technologies’, such as solar panels. Various reports declare solar panels and wind turbines will require three times more silver than what is used today. Silver is also used in electric car production and other tech of the future. When the silver price jumped 12% (its biggest intraday rise since 2008), it was not because of these fundamentals. The price jumped primarily because social media declared the same war with hedge funds and decided to try to do the GameStop ‘trick’ again, making the Twitter hashtags #shortsqueeze and #silvershortsqueeze trend across the world. The silver market is huge and not as easily manipulated as a relatively small stock such as GameStop, and so this attempt was doomed, with silver retracing back very quickly and lots of retail traders losing more money.
All this focus away from fundamentals, meant that the market was quite late to understand the stellar Q4 earnings shown by some great companies, especially Big US Tech firms. Amazon posted $126 billion Q4 revenue and shows no sign of slowing. Google saw a 23% revenue growth in Q4. Unfortunately, the circa 4-6% share price increases these saw due to these results aren’t considered attractive enough to those only seeking the 16x returns GameStop gave some in just 2 weeks. There is so much real opportunity in the markets, especially now.
Scams: If you were to investigate your junk mail (don’t!), you would have probably been sent a scam email within the last 24hrs. It is most likely centred around cryptocurrencies, where it is promising huge returns from trading obscure crypto that you have never heard of. Some of the recent scams are from hackers sending out tweets from reputable, businessmen like Jeff Bezos and even former presidents such as Barack Obama’s certified accounts. They ask for the trusting public to send bitcoin to a wallet and then wait for 2x back.
Unfortunately, as unlikely as these scams may seem, the public is losing millions of dollars to them daily. In today’s ‘at once’ society, many aren’t thinking of growing knowledge and wealth over a long period. Instead, they want instant gratification and huge profits, as is the expectation in most walks of life now. Now, if you want something, you want it immediately- but my experience of wealth generation is the very opposite of this. It takes time to do it right.
Long-term side-effects: Social media has been an excellent source of information for new traders, keen to improve their financial futures. However, there is cause for concern if these young and new entrants blindly follow investment ideas that they do not understand, just because the herd are doing the same thing. We have a huge wave of first- time traders ignoring great companies that have incredible distribution channels and solid, multiple revenue streams, instead opting to follow a funny meme of Elon Musk and a Shiba Inu dog (DogeCoin).
A glaring issue is I don’t see how it can work out for these traders. If they make money in these pump-and-dump Reddit schemes, for example, they will invariably put more into the next one and continue until they lose everything. In this search for increasing returns, they are also susceptible to false promises and scams. On the flip side, if they lose their money in the first attempt, they are likely to shut their accounts and never think about their financial futures again. That is a tragedy.
It is far better to work with a brokerage to diversify your investments across global asset classes, regions and short and long-term plays, concentrating on sound fundamental and technical analysis…improving your knowledge day by day, year by year. Understanding this gives you a great chance at achieving real wealth. This has always been exciting enough for me, no meme needed.
A guest post byBrian Myers (@bjmyersUK), the CEO at Equiti Capital UK.
Absa Bank Kenya celebrated its one-year anniversary at its newly-redesigned Queensway Branch in downtown Nairobi today. It has been a strange first year for Absa which completed the transformation from the Barclays brand in February 2020, three weeks days before Kenya was enveloped by Covid-19 and underwent a shutdown that, while it has progressively reduced, still affected thousands of business, jobs, and customers, as well as the bank itself.
Speaking at the event, Absa Kenya Managing Director Jeremy Awori said the bank had a great strategy to grow and expand, then Covid-19 hit and the year turned to be one of the challenges for the bank, industry, local and global economy. Absa also began to see opportunities for impact and to demonstrate its humanity and innovations to enable the bank to serve customers as they worked to rebuild their livelihoods. They adjusted to have half their staff work from home and instituted a shift arrangement for front-line workers and these enabled 100% of branches to remain open, while the digital platforms had 99% uptime.
Absa offered financial relief to help customers navigate the pandemic after many lost jobs and businesses. They restructured Kshs 62 billion worth of loan repayments, extending relief to over 59,000 customers. They also continue to lend a sizeable amount to SME’s to stay afloat and provide employment, and also committed to paying small suppliers of the bank within seven days to boost their cash flow.
He added that the bank was cautiously optimistic that 2021 will be a better year, with news of vaccines giving confidence to business and governments to relax containment measures and turn to boost economies. Absa Kenya will invest Shs 1.6 billion in 60 technology projects to enhance customer experiences. One will be to automate loan top-ups, allowing people to get loans on top of existing loans, and another will be a new online business-banking platform.
Absa Kenya Chairman Charles Muchene said the bank contributed Shs 50 million to the Kenya Covid Fund, invested Shs 30 million in initiatives led by partners, and donated 210,000 masks for medical workers, with another 20,000 to boda-boda operators. The bank is now asking Kenyans to join and to help underprivileged. They launched a “Wall of possibilities” for people to write suggestions or ideas on the bank’s social media pages or at the Queensway branch on ways that the bank can assist communities to benefit. Absa may fund each idea with up to Shs 2.5 million.
Stanbic Kenya has launched “It Can Be,” a new way of engaging with customers, particularly with women and small & medium enterprises. Stanbic is the second-oldest bank in Kenya, having started over 100 years ago and grew to later merge with CFC Bank in 2007. Today, it is a Tier-I bank with $3 billion assets in Kenya and serves over 200,000 customers with services in corporate & retail banking, wealth management, investments, and insurance.
“It Can Be” symbolises a new push to engage with customers, in the new decade, beyond Stanbic’s 26 branches in the country. The bank has transformed and adopted digital-based solutions to serve its customers who have also largely shifted to online and digital after business disruptions with the emergence of Covid-19. One new Stanbic tool is automating core functions in documentary trade finance using artificial intelligence (AI) and natural language processing (NLP) for real-time counter-party verification, giving customers quick feedback while reducing trade risks.
Stanbic Kenya CEO Charles Mudiwa spoke at the “It Can Be” launch and mentioned how Covid-19 had shown the importance of relationships and standing with communities. He added that the bank’s customer focus had shifted to being relationship-based and Stanbic has embraced four policy initiatives of funding, markets, business competitiveness and influencing policy. In its third-quarter 2020 financial results, Stanbic Kenya announced that it had extended loan restructurings to 23% of its customers, at no cost, to cushion them from the effects of Covid-19. It also reduced the interest charged on existing loans and waived charges for using the bank’s digital platforms.
Stanbic is the largest bank group in Africa, with $151 billion in assets and a presence in twenty countries on the continent. Its largest shareholder is the Industrial and Commercial Bank of China, the world’s largest bank that owns 20.1%. Stanbic Kenya is listed on the Nairobi Securities Exchange (NSE) and shareholders receive a high dividend yield of 8%. Stanbic Africa is also increasing its shareholding of the Kenyan bank to 75% by buying shares from other shareholders.