CFC Stanbic Bank

CFC Stanbic Bank is the official name of the proposed new entity created by the merger of the CFC and Stanbic banks’ pending approval from among others shareholders, Capital Markets Authority, Central Bank of Kenya (Minister of Finance).

The merger makes sense in that the 9th and 10th largest banks (both around $350m in assets) can merge to become the 4th largest bank in the country (after Barclays, KCB, Stanchart)

Sticking points are that the deal is structured to include the creation of new shares (113 million) that will be transferred to Stanbic in addition to buying a majority of Gambit shares (currently the largest shareholder in CFC). Gambit will still remain as the 4th largest shareholder in the bank after the merger.

To sweeten the deal, CFC Stanbic Bank will remain listed on the NSE and Stanbic Kenya will be a wholly owned subsidiary. Also, the statement points out that their branch networks complement each other, so perhaps only Mombasa (where they, and most banks, have branches on Nkrumah street) and branches in Uchumi stores may need a workout.

When the story first broke last year (despite having a caution), it sent CFC’s share price up 10X (to about 900 shillings) and this notice also advises shareholders to exercise caution in dealing their CFC shares until further announcements are made. The announcement was released on Friday (but not yet up on NSE site), and published in the newspapers on Saturday to perhaps dampen the speculative mood/euphoria and allow careful analysis to set in before Monday.

(I don’t have CFC shares but they have been very good stockbrokers to me. Unrelated to this is, I have Stanbic Uganda shares)

National Bank AGM

National Bank of Kenya’s 38th annual general meeting was held on Friday June 22 2007 at KICC. The bank has been profitable for the last few years but has not been able to pay dividends to long suffering shareholders owing to an accumulated deficit from past losses.

some highlights

The debt and (no) dividend has dominated any discussion about NBK and following the government settlement of their debt via Kshs 20.3 billion in bonds, spread out over 15 years, there was some optimism that the shareholders would finally get their due. Their auditors (Deloitte) have raised this matter of emphasis for several years as NBK has continued to claim interest on these government initiated loans with the understanding that it was sovereign debt to be settled one day (which has now happened).

However in a long statement by the chairman (Mr. Muhindi), he mentioned that they were still not in a position to pay dividends and shareholders should not dwell on the matter. He mentioned that NBK’s share price had appreciated by over 30 shillings in the past year, and to any share trader, that was more than any Kenyan company paid in dividends last year.

Unfortunately the dividend issue came up and even the first three shareholders all asked about it among the many questions they posed. The Chairman mentioned that the banking act, companies act, and NBK articles all forbade payment as long as there was a deficit in the revenue account – and that the government bond would not wipe out the deficit, only profits can do that which may not take another four years

bad debts NBK collected 503 million shillings in bad debts which was up from 403m the year before. He said they have still not scratched the surface as many of their cases were still in court.

privatization of NBK was mentioned in the budget last week; however the board does not know more than what was in the media. I.e. that GoK and NSSF would sell their shares either to the public or a strategic partner. On merger possibilities the board would consider the right merger opportunity if it came up (but not for share capital reasons)

other shareholder Q’s

corporate social responsibility NBK assisted in the famine relief program last year, set up a ward at Kenyatta hospital, assisted schools for orphans in Mombasa and is building a kitchen for Mbagathi hospital.

directors why should directors get allowance when we have no divided and some directors don’t even attend meetings?

who got paid? a small amount of dividend (174,000 shillings) was paid in 2006 and shareholders wanted to know to who! Management stated that the correct term should be dividend collected – as some shareholders still have not claimed their dividends (last paid in 1997 and amount totaling 271 million)

what is statutory reserve it is a new rule for all banks in Kenya that even for performing portfolio, 3% must be set aside to provide for any eventual bad debts.

path to dividends: Responding to the umpteenth question on dividends, the MD (Mr. Marambii) stated that there were two ways to get NBK shareholders back on the path to dividends (i) one was to accumulate profits to pay off the deficit – which could take several years or (ii) was rot approve a reduction in the banks capital which would wipe out the deficit. Going forward any profits thereafter could be applied to dividends. He said that shareholders had rejected such a move a few years before but the board was leaning towards bring the option back to the table

goodies NBK tote bag only and lunch. Some shareholders not happy said that the company could have also given a t-shirt while another suggested that they could have saved the money spent on the bags, cold lunch, and printing the annual reports (mgmt: says they cost 60/= each) and paid dividend instead. I did not stick around for lunch which looked like it was going to be a chaotic buffet

Expensive water

Bottled water companies have been lamenting about the excise duty they have had to pay for years – and it got even worse after the budget was read last week, increasing excise duty from 2.05 to 6 shillings excise tax per litre. This is likely to increase the price of water by 3 shillings per bottle. But at least they dodged a bullet with the postponed increased in the price of plastic (Those small plastic bottles you use and throw away cost about 10 shillings each, including plastic labels)

Still it is an odd paradox of life that a litre of water [which anyone can make at home] could (until recently) cost more than litre of petrol [imported from thousands of miles away and undergoes several complex processes].

Mostly Safaricom II

Safaricom, the largest, (acknowledged) most profitable company in Kenya has returned a profit of Kshs 17 billion ($250 million) for the year ended in March 2007 – 40% better than the year before. What are the seven deadly sins again? I just want a decenet election year IPO.

Mostly Safaricom

The ban on plastic paper announced in last Thursday’s budget has temporarily been reversed. It was an amorphous declaration covering all manner of plastics (consumer, industrial) that was likely to lead to an unintended increase in the price of many items.

Safaricom

  • Has lowered rates for phone calls and SMS from today. Mobile companies have become increasingly competitive with Celtel and Telkom Wireless – who have deployed VoIP and roaming features – nipping at the edges of Safaricom’s base. Are free weekends from Celtel the next offering?
  • Safaricom has opted to recycle numbers now that they were running out of lines(prefix 0720-0729. Unused phone lines (not used/topped up) for 4 months can now be reclaimed by the company and be resold (previously they expired after 1 year)
  • I’ve noticed on my recent travels in South Africa, Uganda and Tanzania – that all Vodafone-affiliated networks have a cool feature that lets you know where you are (location). It was tested once in Kenya last year but the flip side to this is that it reminds paranoid people that the phone companies (and other interested authorities) know if you are at Ngurdoto Mountain Lodge, Johannesburg airport or the Speke hotel and that they can find you and perhaps not wanting to spook some subscribers have not activated the feature in Kenya. [Read how it affected a lion’s phone choice and more on big brother from Uganda and South Africa]
  • 30% of Safaricom up for an IPO this fiscal year.

Sports TV: G TV are expected to have 80% of premiership games this year. Is that reason enough for DSTV to panic? (I am not a subscriber). There’s also Oxygen (cable) TV (costs Kshs 999 per month), and free TV (Nation (with La Liga), Citizen (rename them ChelseaTV), KBC, KTN and other channels with various sports offerings. The big attraction of DSTV is sports, but also the other channels like Movies, MNET and Discovery. DSTV now assures that they will still have games of the big four (Arsenal, Chelsea, Liverpool Man U – listed alphabetically, not by rank)- two every Saturday, two every Sunday, and one on Monday night. So what is 80% worth if it features teams like Blackburn, Man City, Sunderland and Wigan at a cost of about Kshs 2,200 per month?