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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.”

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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

Imperial Bank depositors threaten to sue CBK

They want apex bank to admit liability and furnish it with crucial documents that show CBK’s lapse in supervising lender’s operations and depositors’ funds or face class action

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Imperial Bank depositors have written to the Central Bank of Kenya with a list of demands they want met in a bid to recover billions lost after the bank’s 2015 closure by the CBK. The depositors want Central Bank of Kenya held legally responsible for the collapse of mid-tier lender, Imperial Bank Limited.

MMC Africa Law, which is instituting a class action on behalf of Imperial Bank depositors, has given the commercial banks’ regulator a 14-day notice to admit liability and furnish it with crucial documents that show CBK’s lapse in supervising the lender’s operations and depositors’ funds held at the time the bank went under after CBK intervention.

The letter addressed to CBK Governor, Dr Patrick Njoroge warned of the intentions of the depositors to move to Constitutional court after 14 days should the regulator fail to adhere to its demands.

“Unless we receive your admission of liability together with the aforesaid documents and information within the next fourteen days from the date of receipt of this letter, our clients intend to commence legal proceedings against CBK with a view of recovering all deposits held and lost in the said bank, consequential damages and interest and to compel you to provide the information as the case may be. The attendant costs shall be borne by CBK,” the letter reads in part.

ALSO SEE: Imperial Bank owners seek to jail CBK directors

In the demand letter dated September 19, 2017, the MMC Africa Law has asked the CBK to share the FTI Consulting report on the bank, annual financial reports of the bank between 2011 and 2015, CBK inspection reports in respect of the bank, CBK onsite inspection reports, CBK audit reports for year over the same period and the copy of Imperial Bank of Kenya license for the year 2015.

Also in the list of demands are; Fit and Proper forms filled for the directors and CEO of the bank as of October 2015 and documents used for vetting of officials who were managing the bank, any letters by CBK advising and making recommendation or issued directions in respect of conduct of business and management of the bank.

The demand letter also wants the CBK to provide letters by the regulator disqualifying any individual from holding office, restricting, or suspending payment of dividends, bonuses, increments in salary and other benefits to directors and officers or requiring reconstitution of the bank’s board.

“Our lawyers are as well seeking access to any letters recommending corrective measures, action plan and capital restoration plans for solving the deficiencies in the bank and any letters imposing penalties or fines against the bank or its officers for failure to comply with the Banking Act and the prudential guidelines,” said MMC Africa Law in its demand.

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The firm has revealed that neither the lender nor depositors were aware of an impending plan to put the lender under receivership. “Before the closure, the depositors of the bank, including our clients, were unaware of the reasons for the actions taken by the CBK and the KDIC. Following the closure, the depositors were henceforth unable to access money deposited in the bank or conduct normal banking business,” said MMC Africa Law.

So far, information available to the lawyers shows the lender’s collapse was fueled by failure by CBK to investigate information given by whistle blowers concerning status of the bank, failure of the bank to adhere to liquidity, solvency and capital requirements.

Other reasons given for the collapse of the bank are a lack of good corporate governance as required under the prudential guidelines, inaccurate financial statements, irregular insider lending, reckless lending, unsecured loans and collusion between CBK officers and the banks in misstating the financial statements of the bank.

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Banking

Barclays Bank closes seven branches

Hundreds to lose jobs as branches are merged while others are shut down in new restructuring

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Last month, the bank indicated its net profits fell to Ksh3.5 billion in the period ended June 30, 2017, compared to Sh4 billion same period last year, translating to a 13% decline.

Barclays Bank of Kenya has now revealed full details on the fate of customers currently banking as seven branches it has earmarked to shut down beginning October 1 as the lender fights to cut down operating costs in the wake of dwindling financial fortunes.

According to a communication to customers, the bank’s Haile Selassie branch  will be merged with Harambee Avenue while the Waiyaki Way branch will be merged with Westlands. Moi Avenue will also be merged with Queensway House and Nakumatt Meru with Meru Town branch.

On the other hand, the Kawangware branch will be moved to Lavington, Wundanyi to Voi and Rahintullah to Bunyala. Customers were advised to also do their banking via Barclays’ mobile and online banking platforms at any Post Office countrywide.

ALSO SEE: Barclays Bank half year profit drops by Sh0.5 billion

The shut down of the branches will, however, not affect employees, the lender said. “Colleagues working in these branches will be redeployed based on available opportunities and matching competency skills, including the opportunities created by the ongoing Voluntary Exit Scheme. There will therefore be no redundancies as a result of this exercise,” Barclays had said in an earlier statement in July when it first revealed the planned consolidation.

The bank had earmarked to shed off about 160 staffers.

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Last month, the bank indicated its net profits fell to Ksh3.5 billion in the period ended June 30, 2017, compared to Sh4 billion same period last year, translating to a 13% decline.

This was mainly attributed to a reduction in revenue as total interest income reduced by Ksh766 million in the period under review to hit Ksh13.1 billion from Sh13.9 billion recorded same period last year amid an interest rate capping regime. Non-Interest income also recorded a 14% decline in the period under review to post Ksh4.3billion from Ksh5.1 billion same period last year.

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Banking

KBA’s online live chat with bank CEOs resumes

This Friday’s chat will be hosted by I&M Bank CEO Maina Kihara under the topic “Developments in the Financial Markets”

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I&M Bank CEO Maina Kihara: The chat room opens at 9:30 while the session with the CEO starts promptly at 10:00.

The Kenya Bankers Association’s (KBA) online chat session dubbed “My Chat with a Bank CEO” will kick off on 22nd Friday September for the first time this year.

Held every quarter, selected chief executives of banks host live chat sessions while giving their views on the various topics related to banking over a period of four weeks.

This Friday’s chat will be hosted by I&M Bank CEO Maina Kihara under the topic “Developments in the Financial Markets.” According to information available on KBA website, Mr Kihara’s Chat will cover “broad areas of economic activity, highlighting recent market developments that have been influenced by the election period.

Key events such as prolonged drought and the capping of bank interest rates will also be discussed in terms of their impact on the economy over the past two quarters.” The chat room opens at 9:30 while the session with the CEO starts promptly at 10:00.

Ability to post comments and questions to the CEO is given on a first come first served basis. All other participants not in the chat room can still follow the conversation on twitter under the hashtag #CEOchat.

Other CEOs expected to take part in the chat in subsequent weeks include Mr Dan Omoro, the CEO of DIB Kenya Limited and David Thuku, the CEO of Family Bank. The KBA chat sessions are open to all and members of the public are encouraged to log on and engage in productive conversations on banking in Kenya.

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> Banks face hefty fines for over-charging customers
> Kenyans keeping tonnes of cash in banks
> CBK shines spotlight on 12 bad banks

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Banking

This is the best time to buy a bank

Recent acquisitions are happening at between 0.8 to 1.7 times the price-to-book ratio as opposed to the earlier 3.2 to 1.8 ratio thanks to a cap on interest rates

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Cytonn investment analyst Caleb Mugendi.

Local bank acquisitions are now happening at cheaper valuations owing to the effects of the interest rate cap.

“Earlier bank acquisition announcements, such as Fina, K-Rep and Equatorial Commercial Bank were at 3.2, 1.8 and 2.3 times the price-to-book ratio respectively, while recent acquisitions are happening at between 0.8 to 1.7 times the price-to-book ratio,” investment analyst at Cytonn Investment Caleb Mugendi said. “It is a great time to be an acquirer.”

At least seven mergers and acquisitions have taken place in the banking sector in the last few years including the acquisition of Habib Bank by Diamond Trust Bank Kenya, Fidelity Commercial Bank by SBM Holdings and Oriental Commercial Bank by M Bank.

Others include K-Rep Bank by Centum, Equitorial Commercial Bank by Mwalimu Sacco, Giro Bank by I&M Holdings and Fina Bank Group by GT Bank.

“We are already witnessing increased consolidation in the banking sector, with smaller, uncompetitive banks being acquired,” Mugendi said. “We shall continue to witness increased consolidation.”

Mugendi said other factors contributing to the high merger and acquisition activity in the financial services sector were deterioration in asset quality coupled with increased non-performing loans which have gone up 11 per cent during the first half of the year.

ALSO SEE: Report reveals Kenya’s most attractive bank
Read Also: Tuskys and Nakumatt joined at the hip

“The industry will become more stable where only banks with a strong competitive advantage, either in capitalisation, deposit gathering or niche shall remain,” Mugendi said.

Cytonn Investment” Banking Sector Report for the first six months shows that the capping of interest rates led to reduced profitability with margins coming down to a decline of 13.8 per cent compared to last year’s growth of 15.5 per cent.

He said that in order for banks to be able to compete and survive in the new environment, they also had to diversify their income streams through new products such as bancassurance to increase their non-funded income that is not under the interest rate cap.

Mugendi welcomed the decision of the Central Bank of Kenya to campaign for the repeal the interest rate cap law that has been in effect for a year now adding that it did not achieve its intended objective.

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