Category Archives: Stanchart

Reading the Tea Leaves at Stanchart


The CEO of Standard Chartered Kenya explains in the annual report that their strategy is aligned to that of the UK parent group, and that the (Kenyan) bank has focused on chosen markets, does business with customers they know well and products they fully understand – adding that, so far, the standard chartered group one of the few international banks that has weathered the global crisis.

I’m not sure that makes sense to shareholders since if the (UK) parent also drives the same strategy here in Kenya, being conservative has not been as kind to the bottom line

Bank assets through the years
2005: Barclays Kenya 105 billion, KCB 74, Stanchart 72, Equity 11
2006: Barclays 118 billion, KCB 87, Stanchart 81, equity 20b
2007: Barclays 158 billion KCB 112 Stanchart 91 equity 53 billion
2008: KCB 174 billion, Barclays 168, Stanchart 99, equity 77

The conservative bank has seen its peers that have aggressively expanded, also grow at much faster rates. 4 years ago, Stanchart was almost equal in assets with KCB and today KCB is almost twice as large. Stanchart also maintained the No.2 profit figure behind Barclays each year, but falling further back, until in 2008 both KCB and Equity have passed its pre-tax profit position.

Outlook for the bank

– Change in strategy – should they have gone retail? They have Diva accounts (for ladies) and X account (for yuppies), mortgage, and corporate finance where they have cut some big deals

– New Chairman: There are on-going board changes, both executive & non executive. Chairman David Njoroge (board member since 1996, and chairman since 2006) and director J. Mugo (of federation of Kenya employers) will both retire at the AGM this month

– In 2008, they were the only big Kenyan bank to record a drop in income and profit. |Their loans went up 10% to 43 billion, and deposits were up 4% to 77 billion; also income was up, but costs went up 13% to 5 billion owing to infrastructure, technology, and staff costs. but only added two branches in year). The CEO says they have set aside 3.5 billion for new headquarters, acquire/refurbish branches (likely to be for high net worth clients), new core banking system, electronic banking new staff – all part of the largest group investment in Kenya.

-Their 2008 annual report is one of the biggest I have seen at 105 pages. The chairman’s statement takes 6 pages (3 English, 3 Swahili), CEO statement 8 (4/4) , (8 pages on community, environmental & development) – which includes mentions of their being the lead financial arranger for TEAMS sub –cable and Kengen energy expansion), one page on HR (mentions 48% of employees are women, have policies for extended maternity, non-discrimination), One page on tackling financial crime (they trained 300 staff on fraud & also trained 60 Kenya anti-corruption commission (KACC) staff on financial crime risk) – and finally 53 pages of financial statements and notes

– They spent 64 million on corporate social responsibility (CSR). The annual Nairobi international marathon (sponsored by Stanchart) raised 12.5 million in 2008 up from 9.4 million in 07 – and the funds channeled to nine eye hospitals around the country

– Their statement on corporate governance has a policy barring insider trading of the company shares

– Loans to the manufacturing went up from 5 to 12 billion and real estate at 4 billion, transport & communications at 7 billion, and wholesale/retail trade at 10 billion were their main loan categories

– This month shareholders will amend article of the company to allow financial statements be sent by fax, e-mail or be published on their own website/Nairobi stock exchange (site) while notices may be simply advertised in daily newspapers along with abridged financial statements as long as they include an e-mail or postal address from where shareholder can request & obtain full accounts. Shareholders will also vote to allow electronic payment of dividends

Kutwa Tuesday: From Stanchart to LPG

stories found this week

Stanchart Bank:

Smaller profit – Standard Chartered is being much maligned for being the first bank to report a profit drop in 2008 of 4% to 4.7 billion shillings. ($59 million) (Increased 29% in 07). The bank which adopted a conservative approach compared to Barclays, KCB and Equity. Stanchart had asset growth of 9% to 99 billion (13% in 07), deposits up 4% to 77 billion and loans up 10% to 43 billion in 2008. Still their shareholders will get the highest dividend of any listed bank in 2008.

Here are some other performance comparisons of the main banks that have so far reported their 2008 results.

Goes for smaller customers – In a slight about turn, Stanchart has also launched a new low cost transactional account called Hifadhi, costs 2,000 to open, no ledger fees, or ‘cash handling fees’ with e-statements you only pay for transactions you incur, though its’ not as affordable as other ‘cheap’ bank accounts for small earners. Going for smaller customer has been a recurrent theme in 2008 with banks, insurance and investment companies lowering the minimum subscription amount. Examples are pepea from Barclays, Toboa from Old Mutual and even the Government of Kenya which lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~$625)

Bank briefs
– Stanchart get back to what they are good at – big corporate deals this one for Kengen
– Gulf African launches a shariah compliant mortgage scheme
– New bank branches: First Community bank now in Malindi, Ecobank in Kisii, while Family Bank re-opened in Githurai
– Another SMS sends Equity customers into bank panic withdrawals this time in Machakos.

From the blogs

Siasa mbaya, maisha mbaya: Global economic slump aside, Nairobi’s Stock Exchange will not see a bull run until the country’s political problems are sorted out according to MainaT

The Sunday Nation broke a story of the old Embakasi airport been handed over to an unlicensed new airline, but airport analysis comes from one Coldtusker

Following in the success of the infrastructure bond (over-subscribed by 45%), the Kenya Government is offering another bond to supplement its budget deficit; this one is for 8.5 billion ($106 million). More details from Conceptadvisoryservices and the minimum investment is just 50,000 ($625).

Kenya Rugby Effects: Kenya had a wonderful run at the IRB World Cup in Dubai, and knocked out defending champions Fiji in the quarter finals. Here’s some rugby loss reactionfrom Fiji.

Elsewhere

Employees lose & lose – it’s been a bad week for employees as the Employment Act was set aside and the government shifted more of the pension burden to civil servants to contribute towards their own retirement funds.

Madaraka finalized – Madaraka Estate houses were finally sold, apparently ending a long long running saga between homeowners, the City Council and the National Housing Corporation who should really update their website.

Laptop mania – so many offers for laptops these days, new this week were
– Safaricom selling Macbook with broadband modem for 100,000 ($1,250)
– Acer A110 laptop on sale with open office for $230 – great for Kenyans new to mini laptop market
– Even my bank/broker (CFC) hawks Acer Aspire 4710 and has loans that work out to 5,500 ($70) per month

Is Grad School a Con? – Half the Sunday Nation advertisements were for colleges aiming at the recent high school graduates whose results were announced last week. Also growing are the numbers of universities and master programs, but this article argues against going to grad school to avoid the recession with the author pointing out that;

– Grad school pointlessly delays adulthood.
– PhD programs are pyramid schemes
– Business school is not going to help 90% of the people who go.
– Most jobs are better than they seem: You can learn from any job.
– Graduate school forces you to overinvest: It’s too high risk.
(found at chris blattman)

LPG Shocker – when to buy cooking gas last night. Found the cylinder, however it appears that there is now a valve that will be mandatory on all cylinders from April 2009 – it is a universal valve, that will enable consumers to buy LPG /cooking gas from any supplier e.g. Kenol., Total, NOCK – replacing cylinders from any of them, since they will now have a common head/valve. The move is supposed to break the monopoly of established companies e.g. if you had a Kenol gas cylinder, you could only replace it at Kenol when buying new gas, whereas if you wanted to switch to Shell gas, you’d have to buy a brand new cylinder.


new gas cap

The problem was that many Total stations did not have the valve. (I checked at three stations) and they all sent me to the place that has everything in Kenya – Nakumatt. Nakumatt also say they stock valves for all companies, but only had the generic caps to sell. It’s scary to use a generic caps, since there are many fires in Kenya caused by exploding/leaking cooking gas cylinders. Hope this turns out ok when April comes around and more consumers realize they have to buy caps which cost anywhere from 500 ($6.25) to 900 shillings each, another cost to the burdened urban consumer. It would also be nice if oil companies and/or the Government conducted some consumer awareness about this matter, not leaving it to Nakumatt and untrained Petrol attendants.

Kenya 2007 Bank Ranking: Part II

Return on Assets pre-tax profits
Oriental 12.33%
StanChart 5.37%
Imperial 4.81%
Bank of India 4.58%
Barclays 4.48%
Then Equity (4.45%), I&M, NBK, Credit

Return on Equity
StanChart 53.23%
Bank of India 40.58%
Barclays 38.73%
CBA 38.71%
KCB 38.45%
Then Coop, Imperial, Stanbic, NBK, I&M

Loans to deposits ratio
DBK 153%
K-Rep 114%
Middle East 99%
Barclays 97%
NIC 90%
Then Housing Finance, Stanbic, Bank of Africa, Imperial, I&M

Ratio of government securities to customer loans Government-friendly
NBK 284%
Habib Bank 237%
Habib AG Zurich 188%
Bank of India 156%
Baroda 85%
Then City Finance, StanChart, Equity, Credit, DBK

NPA as % of Loans
City Finance 132%
Oriental 116%
Paramount Universal 82%
NBK 70%
EABS 67%
Then Consolidated, Guardian, Transnational, Housing Finance, Southern Credit

2007 Provisions to NPA ratio prudential banks
Stanbic 33%
I&M 30%
Giro 29%
Bank of India 22%
Diamond Trust 18%
Then CFC, Prime, ABC, K-Rep, Chase

Staff Expenses good employers?
Kenya Commercial 4,813 (4.8 billion shillings)
Barclays 4,562
StanChart 2,492
Coop 2,395
NBK 1,495
Then Equity, CBA, Citibank, NIC, CFC

Staff costs/assets even better (paying) employers?
K-Rep 6%
Consolidated 5%
Transnational 5%
KCB 4%
Family Finance 4%
Then Coop, NBK, Housing Finance, Imperial

(Non-interest)/commissions as a % of Total income charge you for breathing air in their branches
Oriental 87%
EABS 61%
Baroda 60%
Family Finance 53%
Equity 53%
Then Consolidated, Coop, Paramount Universal, Bank of Africa, KCB

Placements (short term cash in December 2007) to offer as IPO loans?
CBA 9.4 billion
Equity 6.9 billion
Stanbic 5 billion
NBK 3 .9 billion
Barclays 3.1 billion
Then Citibank, NIC, KCB, Imperial, Diamond Trust

Jan 18: From ODM to Icarus

three weeks after the ill-fated elections and three days of mass protests

The disruptions in the workflow have been a nuisance to the country, while the violence is threatening to cut off Central Africa. But how long before President Yoweri Museveni decides to drive eastwards for another road trip  to check out the situation for himself?

If ODM’s goal is to grind the country to a halt, it may take a while. With tax collections significantly down, the pending Safaricom IPO which I thought will be an election winner could turn out to be a (one time) budget lifesaver – expected to yield over 30 billion shillings in Q2 of 2008.

ODM is now specifically targeting companies linked to key government personalities like Citi Hoppa, Brookside and Equity Bank. This sounds far-fetched and could lead to retaliatory attacks (ODM personalities are also business people); it’s also an extension of silent boycotts that people have undertaken on their own. E.g. people who only selling petrol to their kinsmen, while others boycott pubs or have stopped reading the Nation or Standard/KTN because of their perceived political leanings.

While George Bush is trying to revive the US economy through bipartisan tax breaks, but here we have two sides who won’t even sit down with each other. If they don’t, the crisis may soon spin out of control as the race for the presidency assumes historical dimensions

cut & paste: The Central Bank has introduced business continuity guidelines for all banks. However, it seems to be an update of an IT disaster preparedness document that’s a few years old and does not mention any of the words – crowd, riot, security, cash, ATM – and only one mention of ‘police’. In short, it does not address many of the challenges banks have faced.

Insurers with hearts: Some insurance companies like Pan Africa and Heritage (CFC) are making ab exception on a case by case basis to assist business people victimized in the riots. As a rule, insurance companies have no responsibility to cover such acts

Such as Business coping: Ukwala supermarket, which was destroyed in Kisumu, lost all their financial records. They are asking suppliers & partners to provide them with statements, delivery reports, and invoices as at December 31 and not to bank any of their cheques.

But can’t please everyone: like thieves who take advantage of busy police battling rioters, some unscrupulous borrowers are also using the economic shutdown to plead with banks for delayed repayment and favorable revision of loan terms when they haven’t really been affected.

Signal of confidence: On Wednesday, Imara Holdings introduced a new fund targeting the Diaspora willing to invest in east Africa. It’s an open fund with a minimum investment of 6.5 million shillings (~$100,000) and will be sold through Kenya’s ICEA

– Recognize us: Barclays have eaten humble pie for two years, but who would have through that high-street Standard Chartered would open a branch in Eastleigh?

Local Icarus: what happens when you fly too close to the sun

opportunities
– From PSD Blog; nominate a women entrepreneur to the doing business group of the World Bank.

Current open jobs
from the papers this week
– APA Insurance: unit managers, account managers. Apply to recruitement@apainsurance.com
– Safaricom: VAS Propositions Manager, Channel Development Manager, Key Accounts Executive – apply online. But for the position of chief information officer – but apply though PricewaterhouseCoopers executive selection division (ESD).

Bank Review ’07: Part IV

Finally the big leagues – these banks have large networks of branches and ATM’s in most of the major towns around the country.

6. (No. 13 last year) Equity Bank: Estimated assets of 51 billion ($730 million) and profit of 2.1 billion shillings ($30 million) as Equity continues the staggering 100% annual growth rate it has maintained since it converted from a building society. Took some political and banking industry heat, but was ably defended by authorities and management. The bank also bought out ¼ of Housing Finance and sold 25% a stake to Helios Capital to 11 billion shillings. The Helios deal will be used to finance Equity’s expansion into East & Central Africa as well as the payment to Housing Finance – and with the addition of new directors, Equity needs to sort out some governance and staff morale issues in the new year.

5. (9 and 10 respectivly) CFC Stanbic Bank: Estimated combined bank assets of 64 billion and profits of 2.2 billion resulting from the mega-merger of two mid-size banks – the local arm of Stanbic (Africa’s largest bank) and mid-size CFC with a combined corporate, insurance and stockbroking business. Some clash of cultures and systems can be expected as with most mergers, but this could be a South African – Kenyan partnership that succeeds, where many others have failed.

4. (4) Cooperative Bank: Estimated assets of 70 billion, profits of 2.5 billion in 2007. Another record year for the bank that has recovered massively from a loss five years ago and since the government set out to sort of the cooperatives sector debts. With growth of 15% from a year ago, and profit up 100%, though the MD was rumored to have been keen to move to KCB.

3. (3) Standard Chartered: Estimated assets of 100 billion and profits of 3.5 billion. The quietest of the big three banks in terms of product development & marketing, it lost ground to KCB even as it remains second in market cap. Hawking their products on street corners may have hurt their image, while the corporate banking is plagued by high fees and an operational system difficult to maneuver.

2. (2) KCB: Estimated assets of 110 billion and profits of 4.3 billion in 2007. Had a smooth CEO transition and growth of 20% but with both deposits and loans up 30% from a year ago. But into S. Sudan has been slow, while Uganda was also delayed, showing the difficult of regional banking.

1. (1) Barclays Kenya: Estimated assets of 160 billion ($2.3 billion), profits of 8.5 billion ($120 million) with growth of 25% from a year ago. The bank continued its turnaround, expanding in rural Kenya and other parts of Africa where it had previously withdrawn and closed branches. This is not the first time that it has had to reverse direction – years ago they spun off an unwanted asset finance business that is now NIC Bank – and who they are fighting for dominance of the same market.

who’s missing?
– Charterhouse Bank which is under statutory management by the Central Bank
– Gulf African – new Shariah bank began in 2007, but may be operating under different rules – (see post)
– Kenya Women’s Finance Trust a micro finance organization with assets of about 4 billion and profit of about 200 million that may be the next bank licensed in 2008.