• Kenya - 25 YEAR Treasury Bond
  • Issue No:IFB1/2019/25
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NCBA Group, an amalgamation of NIC Group and Commercial Bank of Africa, yesterday listed 793.8 million new shares at the Nairobi bourse, further cementing the merger.

The newly entity officially began operating as one on October 1, after Central Bank of Kenya gave the green light on September 27.

Given NIC Group initially had 703.9 million ordinary shares of Sh5 each, the additional shares will bring the sum total of issued shares to 1.49 billion at a per value of Sh7.45 billion.

Yesterday, NCBA shares closed at Sh35 this is a 54.18 per cent jump from NIC’s Sh22.7 before the merger was announced.

“NCBA shareholders will be able to derive more value from their investment as the bank is set to enjoy several benefits,”NCBA Group Chairman James Ndegwa said during the bell ringing ceremony.

He said these include leveraging on the strengths of a large financial institution to explore growth opportunities, economies of scale, financial and operational efficiency, business diversification and synergies among other benefits,”

As Sterling Capital report released in April shows the target share price for the merged entity is expected to peak to Sh52.60 after valuation on market price and book value.

“There is great value in investing in NIC Bank ahead of the merger given synergies that will culminate from the merged entity backed by the track record of management of both the companies, the potential, scalability, and the companies’ financial capabilities,” the report stated.

In the beginning of the month KCB Group Plc listed an additional 142,979,717 shares at the NSE following the successful acquisition of the National Bank of Kenya (NBK).

This makes KCB the largest bank in terms of market capitalisation with an offering of 3.2 billion valued at Sh41.8 per share as at close of trading on Tuesday.

NCBA group managing director John Gachora said the lender is currently working to ensure all systems are harmonised by November 1 to offer customers seamless services across the country.Speaking at the event the Chairman of the Nairobi Securities Exchange Mr. Sam Kimani congratulated NCBA for the successful merger and the listing of additional shares.“Investors will always support a company whose values are embedded on the future of Kenya and I can say these two Kenyan entities have come together to form a […]

It is now official, National Bank will be part of Kenya’s largest lender by assets, Kenya Commercial Bank (KCB), after the Capital Markets Authority gave the go ahead.

This comes a few days after Central Bank of Kenya (CBK) approved the acquisition saying it would strengthen the two institutions.

KCB confirmed that it had received consent to acquire National Bank from shareholders holding 297,130,033 issued ordinary shares out of 338,781,200 issued ordinary shares, representing 87.7 percent by the offer closure date on August 30, 2019.

KCB Group CEO says the next move will be to fully integrate NBK into KCB within the next 24 months.

“We will take several integration decisions including rationalization of our branch network in order to enhance service delivery to our customers. Additionally, we will examine the overall human resource needs to enable efficient business organization” said Oigara.

Oigara added that KCB will work towards streamlining human resources, systems, processes and procedures to fully realize the value of the envisioned combined efficiencies and productivity synergies post the acquisition.

Earlier this week, KCB announced the appointment of Paul Russo as the designate Managing Director of National Bank of Kenya for the transactional 2-year period of integration into KCB.

Russo, who was serving as the Group’s Director of Regional Businesses, has been tasked with leading the transition team that will directly report to the KCB Group Chief Executive Officer and Managing Director Joshua Oigara.

It is expected that the NBK Board will be reorganized and will provide guidance during the integration period.

KCB is now proceeding to complete the transaction as all conditions of the offer have been satisfied (or waived, where legally capable of waiver).

With effect from next week, the NBK shareholders who swapped their shares for those of KCB will be able to freely trade the new stocks at the Nairobi Securities Exchange (NSE).The condition for the conversion of the non-cumulative preference shares in the share capital of NBK has been met and the conversion and swap of the said shares will occur.On completion of these processes, KCB will hold 1,432,130,033 ordinary shares comprising 97.17 percent of the total issued share capital of NBK.KCB will further apply the provisions of the Capital Markets (Take-overs and Mergers) Regulations, 2002 and Part XXIV, Division 4 […]

Chief Executive officers are presumed to be immune to the company’s tough policies given that many company boards pull out all the stops to make the bosses happy. However, this is not usually the case for many firms.

Centum Investment CEO James Mworia’s failure to meet his performance targets cost him 75 % salary reduction to Sh45 million in 2018 after he missed out on bonus earnings.

In the year ended March 2018, he earned Sh177.6 million, an equivalent of Sh14.7 million per month, all-inclusive of a bonus of Sh132 million.

Centum’s bonus system is structured in a way that it incentivizes its staff to be more productive and produce more returns for the shareholder funds for which they get rewarded.

However, during the year under review, the firm’s cash returns failed to hit the minimum threshold required to trigger bonus payments for employees.

“Our bonus remuneration is linked to the cash return of the business with a hurdle rate of 15 percent. We did not achieve that in the period and we were therefore not eligible for a bonus,” Mr Mworia told Business Daily.

Mr Mworia is not new to reduced salaries, last year, his package was reduced by 19 percent from 219.2 million recorded during the previous year.

In the year ended March 2019, the firm’s Investment income fell from Sh3.5 billion to Sh3.2 billion due to lower interest earnings and reduced dividends this is despite the Group’s net profit rising by 48 percent to Sh4.12 billion.

Mr Mworia was previously named corporate Kenya’s fourth best-paid manager.

Growth in earnings by commercial banks will soon grind to a halt under prevailing macro-economic conditions, the Kenya Bankers Association (KBA) has warned.

Though a majority of lenders have continued to churn out a profit under the interest rate capping bottlenecks, KBA terms the underlying growth elements as unsustainable in the long-run.

Commercial banks have embarked on a mix of increased government lending, automation and regional expansion in the intermediating period since the legislation of lending ceilings in September of 2016 to absorb the effects of the lending ceiling.

Even so, the bankers association believes growth fundamentals are unattached to the country’s overall economic prospects to leave profit making on sinking ground.

“The government will reach a point where it is able to manage its fiscal deficit and won’t significantly rely on borrowed funds,” said KBA Chief Executive Officer Habil Olaka.

“On efficiency, you can only cut your fat to a point where you remain with the bone, meaning you can’t cut anymore. Even expansion has a limit and this is not where we would like to go.

According to Mr. Olaka, the resolution to sustainable growth by banks lies largely in the freeing up of credit to the private sector’s small and medium enterprises (SMEs) who make for the bulk of Kenya’s economic output.

While the interest rate cap was originally tailor-made for this very purpose, the regime has failed to propel both private sector credit and savings to end as a stumbling block to economic expansion.

Private sector credit growth has for instance fallen to the low single digits in years’ since the cap’s enactment from an average high of 13.5 percent with commercial bank’s telling of hardships of pricing the risks for businesses at a rate of four percent above the Central Bank Rate (CBR).

At the same-time bigger banks have stepped up their expansion to the region with lenders such as KCB opening up a representative office in Ethiopia in 2016 while its nemesis Equity has most recently put out plans to acquire four banks in Southern Africa from London Securities Exchange (LSE) listed Atlas Mara in a Ksh.10.6 billion share-swap deal.

Squeeze […]

Domestic airline Safarilink has received safety certification from the International Air Transport Association (IATA), a trade association of the world’s carriers.

The company has completed the IATA Standard Safety Assessment (ISSA), a voluntary evaluation programme for smaller aircraft.

The association reviewed Safarilink’s operations and management system including flights, ground handling, aircraft engineering and maintenance.

The Kenyan firm is now among only four airlines to receive the certification.

The others are Nepal’s Tara Air Pvt. Limited, Belize’s Tropic Air Limited and Nepal’s yeti Airlines Pvt. Limited.

“Iam very pleased with this exceptional achievement, we are now officially the first carrier in Africa and Middle East to get this prestigious certification and only the fourth in the world,” Safarilink’s chief executive Alex Avedi said in a statement.

“This is an assurance that our airline operations meet the highest international safety standards.

“I would also like to thank the dedicated staff of Safarilink Aviation who always ensure our clients have a safe and memorable experience when flying with us.”

The certification is reserved for operators of smaller aircraft with maximum take-off weight of 5.7 tonnes.

Safarilink’s aircraft fleet comprises Cessna Caravan and DeHavilland Dash 8 models. The company mostly serves tourist routes including Diani and Masai Mara.

Large airlines such as Kenya Airways receive a separate certification — the IATA Operational Safety Audit (IOSA).The IOSA is an internationally recognised and accepted evaluation system designed to assess the operational management and control systems of an airline. Kenya Airway’s current IOSA certification expires on October 21.

A military vehicle is parked on the land claimed by Uchumi next to Thika Road Mall in Nairobi. PHOTO | EVANS HABIL | NMG As reported in Wednesday’s Business Daily, the Kenya Defence Forces (KDF) has taken over land claimed by struggling Uchumi Supermarkets , ignoring the long history that ended with Uchumi being allowed to sell it by a court of law.

Indeed, the listed retailer had just found a buyer for the property, who was willing to pay Sh2.8 billion, before the KDF set up base there to claim ownership by use of force. The payment would have been crucial in the recovery of the company in which the Treasury owns shares by virtue of pumping in billions of shillings to prop up the retailer.

Now, KDF has taken over and started developing the property, ignoring the fact that another government agency is also an interested party.

First, it is important for the Lands Ministry and the National Land Commission to clarify who rightfully owns the prime land. However, it would have been best if the government had nipped the military invasion in the bud.

It is not right for the military to display its force in the face of what looks like a civil dispute as this implies that might makes right. Rather, any claim to the land should have been followed up through the right dispute resolution channels afforded to all.

First, KDF bosses should be aware that there is a major public stake in the revival of Uchumi beyond its shareholding. If investors in a listed company as well as a multitude of suppliers can lose billions of shillings just like that, what will happen to smaller investors or even foreigners?

The implications here are too dire especially where there is action that suggests the law is being circumvented.

Second, KDF is under the Ministry of Defence, which should resolve the matter with the Treasury, Ministry of Trade and the National Land Commission. Why then is KDF, which is a respected institution, engaging in a display of gunboat diplomacy? And if the affected public agencies cannot resolve the issue amicably, what will prevent the police for instance from invading land without resorting to legal mechanism?

Kenyans need to see government agencies moving fast to resolve the issue and restore public confidence in the rule of law. Ideally, that should happen before Uchumi meets its creditors on Monday.

KCB CEO Joshua Oigara (left) and Equity CEO James Mwangi. FILE PHOTO | NMG One has a rich history. The other, a humble one. But that is for those who value once-upon-a-time tales about KCB Holdings Group and Equity Group Holdings.

As at the end of December 2018, the financial performance of Kenya’s two largest financial institutions silently continued to write a story of might, ambition and business rivalry.

With mergers and acquisitions the in thing now, the next chapter of rivalry has just started. But unlike before, it is no longer a two-horse race.

NIC Bank and Commercial Bank of Africa want to make a statement through their merger deal and so is Co-operative Bank Group.

Mauritian lender SBM Bank came in, saw and sealed two deals, first acquiring Fidelity Bank then carving out assets from collapsed Chase Bank where it booked a Sh3.82 billion bargain gain.

KCB and Equity are not taking it lying down. KCB chief executive Joshua Oigara says he wants to use acquisitions to accelerate the group’s growth. It was founded outside the country, then came to Kenya and dominated. It now wants to deepen operations outside the country.

In 1896, KCB, started its operations in Zanzibar as a branch of the National Bank of India. In 1904, the lender extended its operations to Nairobi. But the rest is not just history but rather the making of a story of East Africa’s oldest and largest commercial bank.

By this time, Equity was nowhere in the picture. The thought of starting a purely indigenous bank was almost an unimaginable tale. Only in October 1984 did Equity Bank, then Equity Building Society, enter the scene.

The society’s logo, a modest house with a brown roof, may not have made sense then. But it’s from this humble beginning that small but steady gains were made to yield the present-day lender with the largest number of customers.

By 1984, the government of Kenya had already acquired majority shareholding in National Bank of India and changed the name to Kenya Commercial Bank (KCB).

Then in 1988, the government sold 20 percent of its shares at the Nairobi Securities Exchange (NSE) through an IPO that saw 120,000 new shareholders acquire the bank. That was a big step. But for Equity, its muscles had proved too weak, to the extent of being declared technically insolvent in 1993 due to an assets-liabilities mismatch.One man stepped forward — James Mwangi. He took over […]

Struggling Uchumi Supermarkets’ recent sale of a 20-acre piece of land in Roysambu, Nairobi, to a church group for Sh2.8 billion has received a huge blow.

Judges Philip Waki, Mohammed Warsame and Agnes Murgor have refused to strike out a case that Sidhi Investments filed against Uchumi in 2005, claiming that the retailer reneged on a sale deal after receiving 10 per cent payment for the land.

After retired High Court Judge John Osiemo refused to strike out the case in 2007, Uchumi challenged the decision.

Uchumi insists there was no sale agreement, and that it did not receive any money from Sidhi Investments as deposit for the prime property.

The suit could lead to a landmark decision around the law of contract, as it could further draw lines on when an agreement becomes legally enforceable.

WIND UP

Last November, Uchumi inked a fresh deal to sell the land to Jewel Complex Limited, a firm owned by five top officials of Jesus Winners Ministry, for Sh2.8 billion.

Edward Mwai Kiongo has a 36.36 per cent stake in Jewel Complex, while Agnes Wanjiku Kiongo, Raphael Mwiti Thiaru and James Kiongo Mwai each own 18.8 per cent in the firm.

Paul Gichohi Mutune owns the other 9.09 per cent. Jewel Complex paid Sh330 million deposit in December.

The Court of Appeal’s decision could complicate the deal and make matters harder for Uchumi, which is already struggling under the weight of billions owed to its suppliers.

The supermarket is fighting a petition to wind up operations, the second in three years.During Uchumi’s first cash crunch in 2005, the retail chain set its sights on selling the Roysambu land to ease its financial troubles.SALE DEALOn March 9, 2005, Sidhi Investments offered to buy the land for Sh118 million, which Uchumi was satisfied with.The firm agreed to pay a 10 per cent deposit for the land and wrote a Sh11.8 million cheque in favour of Uchumi.But two days later Uchumi advertised the land for sale and Sidhi Investments decided to sue.The firm asked the High Court to compel Uchumi to enter into a sale agreement with it and wrap up the transaction.Uchumi however argued that there was no agreement to sell the land to Sidhi Investments and denied receiving any payment for the property.JUDGMENTThe Court of Appeal has now agreed with retired Justice Osiemo, who ruled that if indeed Uchumi received Sh11.8 million as a 10 per cent deposit for the land then there […]

KCB Group has made an offer to acquire 100% shares of domestic peer National Bank of Kenya (NBK).

The move comes at a time when a series of consolidations is underway across the Kenyan banking sector. Last week, another Kenyan lender NIC Bank secured shareholder approval for its merger with Commercial Bank of Africa (CBA).

KCB proposed the transaction through a share swap of ten ordinary shares of NBK against one ordinary share of KCB.

However, KCB did not disclose the valuation for NBK.

In the recent years, NBK is troubled with increasing bad debts. The deal, if advances, is expected to restore the bank’s market position.

The Kenyan government holds a 22.5% stake in the bank. The National Social Security Fund (NSSF) holds 48.06% and the remaining 29.44% is with public.

On the other hand, the National Bank of Kenya acquisition is aligned with the KCB’s expansion strategy. It will also help bolstering its presence in existing market.

KCB Group CEO and MD Joshua Oigara said: “The proposed transaction will further consolidate the banking sector in Kenya and will create stronger institutions enabling KCB to play a bigger role in the financial inclusion agenda.

“The acquisition would accelerate the Group’s growth ambitions and enhance value to all stakeholders.”

The acquisition offer is subject to respective shareholder and regulatory approvals.

Established in 1896, KCB Group is one of the largest commercial bank in East Africa with 258 branches.Besides Kenya, the bank operates in Tanzania, South Sudan, Uganda, Rwanda, Burundi and Ethiopia (Rep).

Commercial banks pumped more money into government securities in the year to December 2018 even as they tightened credit to private enterprises and individuals, industry data shows.

Financial statements for the year ended December 31, 2018 show the 37 banks out of 40 invested Sh146 billion or 14.3 percent more to hit Sh1.175 trillion.

The lenders in turn earned 14.1 percent more or Sh125 billion last year compared to Sh110 billion a year earlier.

Lending to the private sector grew a paltry 2.4 percent in the same period, having been the biggest loser in the credit market following the coming into force of a law capping interest rates.

The credit growth remained well below the central bank’s target rate of 12 to 15 percent, which is deemed adequate to support economic growth.

The data shows Kenya’s seven biggest banks raised investments in government paper by 9.7 percent last year to Sh700.6 billion, in turn seeing their interest earnings from securities go up by 13.7 percent to Sh76.3.billion.

The tier one banks include KCB #ticker:KCB, Equity #ticker:EQTY, Co-operative Bank #ticker:COOP, Standard Chartered #ticker:SCBK, Barclays Kenya #ticker:BBK, DTB Bank #ticker:DTBK and Stanbic.

They all grew loan books at a slower pace of 3.6 percent or Sh57.3 billion to Shl. 63 trillion, and saw the interest income from loans to customers go up by a similar rate to Sh192.9 billion.

The Treasury’s appetite for debt appeared to have grown in the past couple of years — a development that has seen the government borrow heavily from local markets, crowding out productive sectors of the economy.

Kenya introduced interest rate controls in September 2016 with the enactment of a law that limits lending rates to not more than four percentage points above the Central Bank Rate.

This was in response to the high cost of credit that saw banks lend to private businesses and individuals at more than 20 per cent interest.Commercial banks have, however, shied away from lending to individuals and small businesses and blame the legal caps for the slow rate at which credit is growing.The banks, through lobby the Kenya Bankers Association (KBA), have argued that it would be more lucrative to lend to the government, which carries minimum risk in the wake of the controls.The Treasury had earlier promised the International Monetary Fund (IMF) a repeal of the caps, in response to a sharp decline in credit growth but Parliament stalled the bid.