Africap Offloads 15M Equity Shares after 5 Years

5 year period
The expiry of the 5 year lock in period where initial shareholders of the company (This was placed on ther principle shareholders of the company when the bank wenbt public in 2006).The principle shareholders were not to sell their shares until after August 2008 when the period would expire for Equity. The expiry of this period saw the opening of a window of opportunity for Africap to offload its shares though three months latter in December.

Shares
The firm sold the shares for Sh2.5 billion, reaping one of the highest returns from equity investment in Kenya over a five-year period. AfriCap was one of the seven large shareholders, who the Capital Markets Authority (CMA) had barred from selling Equity Bank shares before August, 2008.

Equity Shareholders
-Private Equity firm Helios EB held 24.23% of the bank’s shares by end of March 2008
-British American Investments-10.73%
-Dr. Mwangi-5.3%.
-Mr Nelson Njoroge 6%
-John Mwangi 4.58%
-Africap 4.02%
-Equity Bank’s Employee Share Ownership Plan (ESOPs)held 4.02 per cent.
-The rest of the shareholders in the bank had less than 2.93 per cent shares.

Benefits
Over the years Equity has split it shares, issued dividends and bonuses and continued to post strong profit margins alongside receiving major local as well as global awards in microfinance as well as innovative banking.

Expansion
In Kenya the Company continues to expand its customer base, branch network and ATM machines to serve a wider clientele Recently the company enterred into stock dealerships with the listing of Safaricom IPO alongside its insurance products and real estate development loans available to its clients. The company also acquired 24.9% of Housing Finance successfully enterring into the housing and property development market.
Equity Bank closed 2008 as the only stock at the NSE to post positive returns oscillating between Ksh 155 and 176 by end of December 2008.

Financial supermarket
Equity is endeavoring to become a financial supermarket of sorts with its diverse poducts lines and synergetic engagements but more still needs to be done to harnsaess these opportunities for the betterment of its services.

Parting shot!
Apart from long ATM queues amidst continually broken down ATM machines, hectic banking hall escapades, Overworked staff, and seemingly swelling cleintele base that may not be sufficiently served by the bank, Equity still rocks and its shares are set to go places in 2009!

More Jitters in Banking Industry as MPESA Reigns

More jittersThe MPESA phenomenon ha continued to cause jitters and sleepless nights to many players in the banking industry who may have been lobbying the Finance minister to crack the whip.

Audit
Yesterday Hon Michuki, the Finance Minister joined the fray and in a rather stern statement called for an audit of MPESA by the Central Bank of Kenya on concerns about the safety of users’ money.

Regulations
M-Pesa and Zain’s equivalent, Sokotele-Now Zap Brand have been operating outside Central Bank’s (CBK) regulation unlike other money transfer services pending the passage of a National Payments Systems Bill.

Popularity
The money transfer system, launched in March 2007, has become popular with the unbanked population serving as a deposit account for some, hence causing jitters in the banking industry.

Money laundering
The phone-based electronic money transfer has been viewed as being prone to abuse by money laundering which is an illegal practice. Further concerns of the likely collaspse of the system have been rending the air and those shouting loudest are the banking industry players. Any guess?

Money Transfer
The MPESA daily money transfer service has been growing by the day and currently over 20B have been transferred through the System snce it was launched. Its registered account users now stand at over 4 Million and the number is growing by the day.

Parting shot!
The successful takeup of MPESA service has clearly demonstrated that Kenyans demands easily accessible, secure cash payment services in this fast growing emerging market and the regulators must take heed not to stiffle the growth with unneccessary and ill-advised regulations.

Kenya Economy Reeling From Post Election Violence

Economy
The orgy of violence that has greeted Kenya's disputed election result has led to hundreds of deaths and forced tens of thousands to flee their homes.The post election violence witnessed in various parts of Kenya has indeed raised pertinent questions on the resilience of the economy to sustain long periods of civil unrest and violence.

Tourism
Kenya's tourism industry, which brings in some $900m (£455m) a year and attracts more than one million visitors a year, is sure to take a hit after four days of rioting and ethnic clashes. Its relative economic success has been helped in part by its thriving tourist sector, with visitors attracted by its abundant wildlife and pristine beaches.Provisional figures for 2006 from the Kenya's tourist board said the country had received 1.5 million visitors for the year, a growth of 5.2 per cent.

Repercussions
The stalemate over the election results has cost the economy billions of shillings with the repercussions being felt across East Africa.

Bankers Analysis
Several bodies including the Treasury, Nairobi Stock Exchange, Tourism sector, and financial organizations have given their predictions and analysis of the implication of the destruction and sporadic violence that errupted in the country against a backdrop of controvesial presidential elections and delays in announcements.
The effects are indeed immense and portends widespread implication for Kenya as an emerging economy that has recently been rated the fast growing and most preferred by investors seeking emerging markets.

East Africa
The pinch on the economy is not only being felt locally with close to 4B having been lost but has spilt to Uganda, Tanzania Rwanda and Burundi where essential products were not forthcoming as fuel passing through Kenya was unavailable due to closure of roads and violence.

Central Bank of Kenya analysis
Kenya’s economy has grown steadily in the past five years with all indicators pointing out that if the trend was sustained, growth would hit 10 per cent. The economic recovery that started in 2003 has achieved some major milestones and laid down solidly the growth fundamentals. The growth fundamentals laid down have reversed growth decline that had taken years. It is true that the recent violence in some parts of the country could adversely affect the tempo of economic activity, but cannot destroy the growth fundamentals so far laid down. more

Foreign investors
Private investment has been behind Kenya's thriving economy. It has averaged GDP growth of 5% since 2002 and the economy is expected to expand by 7% in 2007 - rates of growth that are only beaten in booming Asian countries such as China.
Kenya's shilling strengthened by 9% against the dollar in 2007 as foreign investors poured into the country's stocks and bonds, but those gains were largely erased when currency markets began trading on Wednesday.

Equity Market
The equity market on the Nairobi Stock Exchange lost 40 billion Kenyan Shillings ($591 million) in value on its first day of New Year trading Wednesday. Kenya has attracted a large number of multi-nationals and is home to one of the world's fastest growing stock exchanges.

Positive Prospects
Expected planned sale of Safaricom shares might stir the market once again back to its feet .

The Changing Faces of Banks in 2007

Radical changes
The banking sector has come a long way and with mergers and acquisitions in the offing as well as the emergence of near financial supermarkets the future is indeed bright for our banks.

Investors
Most investors in banks stocks have often made a kill over the last few years with splits, dividends, bonuses and price appreciations having been witnessed.

New products
The banking sector is indeed undergoing radical changes and new products are being unveiled everyday target the larger populace as oppossed to the big-mans-bank syndrome that had been evident a few years ago. Banks are now literally going to the streets to hawk their wares and sell the loans to every would be buyer with little or no requirements at all.

Interest rates and competition
Interest rates have dropped drastically as banks strive to offer cheap products to borrowers for their businesses and other needs.Competition in the banking industry is indeed evident and every new day new banks are emerging.

New Banks
Most non deposit taking institutions are now converting into microfinances and finally banks in a matter of years and the number of banks is increasing by the day.

Banking stocks
The banking stocks have continued to soar to new record highs never witnessed before as investors both local and foreign rally to buy them.

Cross border trading
These banks have even dared to cross border to other regions talk of KCB in Uganda and southern Sudan where it continues to serve its customers. Others are savouring the region for strategic partners to inject new blood inform of liquidity into the system talk of Equity and Helios deal as well as Stanbic and CFC deal.

Stock broking
Other banks are craving for a piece of the stock market pie with ventures into stockbroking. NIC failed bid for the stake of the collapsed Francis Thuo (won by renaissance capital) has seen it partner with another securities dealer. Talk about slowly getting their.

Asset Finance
Asset finance is becoming the talk of town with considerably lower interest rates charged by banks for the same. This was started by NIC bank but now adopted by NBK, KCB, Equity, Family Bank, Stanbic and the list is growing.

...and the changes go on...

Microfinance banking set to spur economic growth

Silence

After a couple of weeks of silence in this blog due to travel and work demands i must apologize to my avid readers for some dissapointment with my postings which havent been forthcoming.

Microfinance Banking

Microfinance is a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. By helping them to accumulate usably large sums of money, this expands their choices and reduces the risks they face.

Today after reading the case of Equity bank and others seriously following suite including the hirtheto big mans banks of yersteryears that are now hawking loans and other products,i was drawn aback to the role of microfinance banking in economic growth and profitability.

Internation Year of Microfinance

Today, microfinance plays a major role in the development of many African, Asian, and Latin American nations. Its impact is substantial enough to have warranted acknowledgment by the United Nations who declared 2005 "The international year of microfinance", reminding people that millions worldwide benefit from microfinance activities.

Economic Growth

It is generally accepted that long-term sustainable microfinance programmes hold enormous potential for national economic growth and development. Many microfinance institutions have sprung up and some are already applying for banking licenses. The future is indeed brighter for microfinance with the passing of microfinance bill in parliament. more

Accollades

Microfinance institutions are indeed set to change the course of business in the world. Case studies of Equity in Kenya and the Bangladesh bank attest to this. Both institutions have already wone various accollades for their work.

Bank on Banks Stocks in the Next 5 Years

The first half of the year 2007 saw many banks release their profitability results with many declaring good dividends followed by bonuses and even rights issues. Over the last few years Kenyan banks haven been on a profitability path and the momentum is not likely to be lost soon.

In 2006 the industry grew by 39.7 per cent to Shs 12.6B in the first half of the year up from Shs 9 B in 2005 over the same period.

Macro-economic Environment

The banking industry has been doing well since 2003 with indications that the momentum will be sustained over the next five years. Buoyed by favorable macroeconomic environment that encompass the stable inflation, exchange rate and interest rates. Kenya's robust banking industry may have improved tremendously in terms of size, profitability and product offering over the last 10 years but the growth does not reflect in the country's overall development despite the 6.3% growth realized in 2006/07 financial year. This is because despite news that the poverty index now stands at 46% it is evident that many are still living in abject poverty with nagging family obligations.

High fees and Interests rates

The emergent news on profitability by banks may be good news to stock punters but consumers of financial services are paying the highest price for borrowing little money from commercial banks. Further customers are continually being charged high account maintenance fees alogside other non interest charges that have compounded a bigger portion of banks profitability pie. This comes in the wake of recent calls by the CBK to banks to significantly reduce their interest rates on loans. This was followed by threat to name and shame the offenders but this seems to have fallen on deaf ears. Equity bank however did cap loan processing fees from 18% to 15% in response to CBK directive.

Growth

The new report indicated that the total assets for the banking sector grew from Ksh328 billion (US$482 million) in 1997 to Ksh746 (US$1.4 billion) in 2006, representing a 132% increase.
Similarly, profitability rose from Ksh 15 billion (US$23 million) in 1997 to Ksh 27 billion (US$41 million) in 2006. Their growth is expected to be sustained with still a small fraction of kenyans having bank accounts.

Finance Bill

The budget for 2007/08 financial year however has brought a new challenge of capitalization to Microfinance Institutions (as well as banks alike). MFIs had been pushing for the passing of the Microfinance Bill that would see these Small and Medium Enterprise (SMEs) lenders accept deposits among other things.

The finance bill stipulates inter alia to increase the minimal capital requirement for commercial banks from Ksh250million to Ksh1 billion within the next three years.

Mergers and Acquisitions

The move to increase capital requirements for banks is likely to precipitate moves for Mergers and Acquisitions (M&A) in the banking industry once the bill is enacted. CFC and Stanbic had already led the way and who knows with Equity acquiring 24% of Housing Finance they might push for a merger of this fast growing lender currently dogged by controversy and the mortage company.

Oligopolistic Tendencies

Three major banks, Barclays, Stanchart and KCB have dominated the banking sector, controlling between 40 and 50 per cent of the market throughout the past ten years leading a pack of more than 40 banks.

In terms of market share, the top five banks last year were Barclays Bank at 16 per cent, KCB at 13 per cent, Standard Chartered at 11 per cent, Co-operative Bank 8 per cent, Commercial Bank of Africa 5 per cent and National Bank of Kenya 5 per cent. The top ten players control more than 75 per cent of the market, with the remaining 32 sharing the balance. Bankelele has provided an avid analysis of the Kenya banks ranking.

Bank Stocks

With Banks profitability on the rise and their ambitious expansion programs to other markets coupled with mergers and acquisitions, investors will never go wrong banking on the stocks of the listed banks in the long run. These encompass Barclays, KCB, Stanchart, ICDCI (You can check my earlier analysis on ICDCI), CFC, NIC, Housing Finance, NBK, and DTK.

Buy hold and make money!