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Equity Bank sells big stake to South African firm

CEO James Mwangi says transaction, which is currently the largest of its kind in Sub Saharan Africa, brings diversification to Equity’s capital base

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Equity Bank CEO Dr James Mwangi: Arise brings along substantial resources as well as expertise, which will be invaluable in accelerating the growth of our business.

South African firm, Arise, has acquired a 12% stake in Equity Group Holdings Limited, the parent company of Equity Bank, making it the single largest shareholder in the Nairobi Securities Exchange- listed company.

The deal is estimated to be worth Ksh17.6 billion based on Equity Group Holdings’s Ksh147 billion market valuation. Group CEO and Managing Director Equity Group Holdings, Dr James Mwangi, welcomed the collaboration with Arise, saying their vision is to champion the socio-economic prosperity of the people of Africa.

“We have endeavored to achieve this by being an innovative and inclusive provider of financial solutions,” said Dr Mwangi.

“We are excited by the expanded opportunities this development presents, to combine our market leading position with Arise, who bring along their substantial resources as well as expertise, which we believe will be invaluable in accelerating the growth of our business.”

READ: Two young men who turned problem into opportunity

The transaction, described by Equity CEO as the largest of its kind in sub-Saharan Africa brings diversification to Equity’s capital base.

According to Arise CEO, Deepak Malik, this acquisition speaks directly to the core mandate of Arise, which is to invest in sustainable Financial Service Providers (FSPs) in Sub Saharan Africa to boost economic growth and job creation.

“Arise aims to strengthen and develop effective, inclusive financial systems through collaborative long term partnerships with leading institutions such as the Equity Group,” said Malik.

“The financial services industry plays a crucial role in facilitating infrastructural and industrial development at national and regional levels. A broader, deeper financial sector facilitates the growth and prosperity of Africa’s businesses, from small-scale entrepreneurs to large corporations and promotes financial inclusion”, he added.

Related: Equity Bank scoops 19 Think Business banking awards

“Having pioneered agency banking on the continent the Equity Group has an established track record, characterised by high growth and a solid financial performance and we are pleased to partner with them to advance the local banking sector,” Malik said.

Malik concluded by saying that with the support of Arise, Equity Group Holdings and Equity Bank are well-positioned to deliver future growth on the continent.

Arise is owned by three key shareholders, namely Norfund, FMO and Rabobank.  It boasts operations in six East African nations with a client base in excess of 11.7 million and has the largest number of deposit customers in Africa.

Business Today is the leading independent online business website in Kenya. Started in 2012 by a veteran business journalist, it has a huge following both in Kenya and abroad. It covers various business and related issues. Email editor at: [email protected]

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Banking

Stanbic unveils unit for the super-rich

Known as Wealth, it becomes the bank’s third business unit, dedicated to serve the bank’s growing Personal and Business Banking, as well as Corporate and Investment Banking client base

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Stanbic Bank’s Regional Head of Wealth (East Africa) Adam Jones.

Stanbic Bank Kenya has launched a new business unit called Wealth dedicated to offering a complete range of financial services including Life and General insurance, investments, health solutions and international products/services for individual and business clients across all points of contact with customers.

It becomes the bank’s third business unit, dedicated to serve the bank’s growing Personal and Business Banking, as well as Corporate and Investment Banking client base.

Speaking during the launch, Stanbic Bank’s Regional Head of Wealth (East Africa), Adam Jones said that the renewed focus on the wealth offering is guided by customer needs and demand.

SEE: iPhone 8 comes with three crazy features

“Our customers in Kenya are getting more sophisticated. We have more and more individuals and organisations seeking wealth-type products. It is this demand that we intend to cater for by offering the best range of financial services and products; hence the decision to give it the right focus within the organisation with the creation of this unit. We expect this trend to continue growing in Kenya, which holds the best outlook for long term investment,” Mr Jones explained.

In delivering the Wealth proposition, the new division will leverage on the capabilities of Stanbic Bank Kenya as well as strategic partnerships with Liberty Group.

The Managing Director of Liberty Life Assurance, Abel Munda, said: “This partnership enables us to deliver a superior, enhanced and innovative value proposition to our customers that takes care of all their financial services needs. The one-stop shop facilitates us to analyse, assess and advise clients efficiently based on their individual needs.”

READ: 10 counties took lion’s share of roads funds

Through the connections to offshore capabilities in Isle of Man, Jersey and Mauritius, as well as onshore capability, Stanbic Bank Kenya will offer investment products and solutions across all customer segments.

“Wealth is not only for the wealthy; it is for everyone. This is the reason we are integrating Wealth across our range of financial services so that we can offer Universal Banking and Financial Services solutions proposition more holisitcally and seamlessly from a single point of contact. We have the expertise, people, network of partners and ability to offer our clients an unmatched experience and one solution for all their on-shore and off-shore financial planning needs,” Mr Jones added.

SEE: Kenya’s super-rich who don’t show off their wealth

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Banking

KCB Group posts Sh22.4b pre-tax profit

Kenya’s largest lender, by assets, registers a 3.1 per cent growth in third quarter driven by non-interest income which was up 18.4% to Ksh 17.5 billion mainly as a result of growth in fees and commissions

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KCB Group has posted a pre-tax profit of Ksh 22.4 billion in the third quarter ending September 30th, 2017 a growth of 3.1% against the same period last year when it registered a pre-tax profit of Ksh 21.7 billion.

Total interest income was down 3.6% to Ksh 46.8 billion as the effect of interest rate cap and an economic slowdown in the political season set in. This was partially offset by a reduction in interest expense by 10.9% bringing net interest income to KSh 35.7 billion, a decline of 1% against third quarter in 2016.

Total operating income grew by 4.6% on the back of non-interest income to close the quarter at Ksh 53.2 billion cushioning the Group’s earnings in a challenging economic environment. Total assets improved by 14.5% from Ksh562.3 billion to Ksh643.8 billion.

KCB Group CEO and MD, Mr. Joshua Oigara, said the full effect of the law capping interest rate in a quarter marked by a slow business environment on account of the general election in Kenya – the Group’s largest market – was mitigated by growth in the loan book, prudent management of cost of funds and focus on non-branch channels.

“Our business fundamentals remain strong. We remain optimistic and true to our strategy, even in the face of challenges. As the business environment evolves, it is important for the Group to expand its revenue streams to remain competitive. This aggressive focus on non-branch channels leveraged on our Fintech strategy is paying off,” said Mr Oigara.

KCB Group’s non-interest income currently accounts for 32.9% of the total operating income, underscoring the growing importance of income derived from non-branch revenue channels. The Group expects alternative revenue channels to be the growth driver in the next few years. KCB has pegged its future on its Fintech strategy that rides on a digital platform to provide seamless services for its
customers.

“The banking sector continues to undergo numerous challenges and as a Group, our continuous innovation and customer centric orientation ensures that we remain focused on acting as an enabler for progress to our customers,” said Mr Oigara.

KCB’s adoption of new technologies is bearing fruit having acquired over 10 million customers on its mobile platform either directly or through partnerships over the past five years. Currently, non-branch channel systems—Mbenki, KCB M-PESA, Mobi and payments— account for 85% of total transactions.

Since inception of the flagship KCB M-Pesa platform in March 2015, the Bank has disbursed over Ksh
20.3 billion in loans to over eight million customers on their mobile phones.

“By 2020, it is our expectation that through our Fintech the contribution of non-interest income will grow towards 40% of the Group’s operating income. As the business environment evolves, it is important for the Group to expand its revenue streams to remain competitive. We shall continue to concentrate on growing non-interest revenue contribution by driving forex and trade revenues, in addition to optimising our agency card and mobile banking services,” said Mr Oigara.

KCB Group’s liquidity position stood at 37.7% in the third quarter of 2017 and was 17.7% above the CBK’s statutory minimum requirement. The Group’s capital strength remains robust with a total capital of Ksh 101.9 billion in the third quarter of 2017 up from Ksh 86.2 billion in 2016.

READ: Kenya inks Sh30b deals to boost power supply

The Group’s core capital as proportion of its total risk weighted assets was 6.9% above the Central Bank of Kenya statutory minimum of 10.5% a further indicator that Group was on a firm capital footing.

Overall, the bank’s total capital as a proportion of its risk weighted assets stood at 18.7% this year compared to 17.9% in the same period in 2016.

Mr Oigara said: “We need to continually manage our capital and risks to keep the business growing while delivering on our targets. The future lies in leveraging technology to drive efficiencies in our operations in order to serve our customers better with relevant products that meet their expectations. I am glad that KCB is among the pioneers in this emergent space. Our focus will be on generating higher
growth, and over the next three years, we will be seeing a bigger and more efficient bank.”

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Banking

Co-op Bank Q3 net profit shrinks to Sh9.5

Top tier bank blames a tight operating environment, especially with the capping of interest rates and the general economic slowdown in an election year

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The Co-operative Bank has posted a net profit of Ksh 9.5 billion for the third quarter of 2017, which is a decline from the Ksh 10.5 billion recorded last year.

The top tier bank says a tight operating environment, especially with the capping of interest rates and the general economic slowdown in an election year, has slowed down the performance compared to same period last year.

Total assets, however, grew by 9.7% to Ksh 388.3 billion compared to Ksh 354 billion in 2016.

Net loans and advances book grew by Ksh 32.4 billion to Ksh 289 billion compared to Ksh 257.8 billion in last year’s period.

Customer deposits on the other hand grew by Ksh 31.2 billion to Ksh 289 billion, up from Ksh 257.8 billion.

Shareholder’s fund grew to Ksh 67.3 billion, supported by a steady growth in earnings retention and a dividend policy anchored on progressive growth.

READ: Odindo to stay at Standard until next November 

Co-operative Bank of South Sudan that has a partnership with Government of South Sudan (Co-op Bank 51% and GOSS 49%) made a profit of Ksh 30 Million in the period.

“The Group has a sustained focus on long-term profitability, with current challenges in the operating environment being mitigated by the benefits arising from the successful execution of the ‘Soaring Eagle’ Transformation project with critical focus on improved operational efficiencies, customer service and lower operating costs,” Group CEO and MD Dr Gideon Muriuki said in a statement.

Overall, the Bank’s cost to income ratio improved from 52.1% in the 2016 financial year to 47.6% in this year’s third quarter.

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Banking

Equity branches to turn into relationship centres

Group CEO James Mwangi says 91% of all transactions have moved from the fixed cost delivery channels of brick and mortar of bank branches and ATMs to variable cost delivery channels

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Equity Bank Holdings Plc has embarked on an aggressive innovation journey geared towards transforming its key branches into relationship management centres, in a move meant to offer its customers personalised experience.

Speaking during the release of the bank’s Q3 Financial Results, Equity Bank Holdings MD & CEO, Dr James Mwangi noted that for the last three months, the Group’s innovation and digitisation strategy led to 91% of all transactions moving from the fixed cost delivery channels of brick and mortar of bank branches and ATMs to variable cost delivery channels of mobile, internet, mobile App, Agency and merchant banking.

Regulatory and social pressure on banks’ pricing structures and downward pressure on deposit spreads is leading to the recognition that asset or relationship management is a viable new banking segment. Banks are starting to understand that asset management will boost non-interest revenue and foreign currency earnings

“Of the total 341.3 million monetary transactions, only 30.3 million transactions passed through the branches and ATMs with the rest, 311 million transactions passing through the third-party channels. This shift in delivery channels resulted in a reduction of 11% in staff costs while registering a modest increase of 2% in total costs maintaining a cost income ratio of 51.6% at the Group,” Dr Mwangi said.

READ: Wallace Kantai appointed CBK head of communications

The above results indicate that more customers have now shifted to accessing financial services via personalized devises like the EazzyBanking App, Equitel, Internet Banking, Agency Banking and Merchants. Equitel recorded 197 million transactions by September 2017 compared to 150 million transactions during the same period in 2016. Equitel recorded a 41% growth from Ksh 250.8 billion to Ksh 353.6 billion, Internet Banking 1,696% from Ksh 5.4 billion to Ksh 96.9 billion, Agency Banking 18% from Ksh 331.6 billion to Ksh391.3 billion and Merchants growing by 16% from Ksh 34.8 billion to Ksh 40.3 billion in transaction value.

Despite branches recording a decline in number of transactions by 6% from 15.7 million to 14.7 million, there has been a 3% increase in the value of transactions from Ksh 1,071 billion to Ksh1,106 billion. This has been largely driven by the Bank’s focus on the SME sector, corporate and Supreme banking. Currently, Equity Bank has rolled out Supreme branches countrywide, as it sets its eyes on positioning the branches as relationship management centers of excellence.

This comes at a time when in a recent survey by Geopoll ranked Equity Bank as the Most Preferred Lender in Kenya with the highest scale in Africa followed by Capitec of South Africa and GT Bank of Nigeria.

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