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...

Asset Finance:The New Craze in Town

What is it?
This is typically structured as a line of credit secured by a specific asset or across a combination of existing assets. It encompass using balance sheet assets (such as accounts receivable, short-term investments or inventory) to obtain a loan or borrow money - the borrower provides a security interest in the assets to the lender. This differs from traditional financing methods, such as issuing debt or equity securities, as the company simply pledges some of its assets in exchange for a quick cash loan.
This type of financing is typically used for short-term borrowing or working capital. Companies using asset financing commonly pledge their accounts receivable, but the use of inventory assets is becoming more frequent.

NIC Bank
Every once in a while our customers require a helping hand to finance their assets. NIC Bank for example ventured into helping customers to acquire their assets with ease, whilst keeping our pricing very competitive. This augured well with the market and helped the company reap massive returns.

Asset Financing Now
Asset financing has become a major competitive ground for banks as they seek to increase their interest income-based revenue. Banks are competing on interest rates, collateral arrangements and longer repayment periods to persuade customers to take up this line of credit.
Already, asset financing is accounting for an average of 15 per cent of total interest income for banks. The industry believes potential to raise this figure exists, considering that most banks started giving asset financing more focus only in the last five years.More

Stanbic Bank
This is is a relatively new entrant in the asset financing market, having set up the department about four years ago. The company is financing 30 to 40 vehicles per month.

KCB
KCB’s recently launched Asset-Based Finance product allows customers to borrow from Sh1 million to purchase assets in a repayment period of 12 to 60 months. Borrowers are required to make a minimum deposit of 20 per cent of the value of new assets.

Asset based loans are perfect for:
-Company acquisitions and business mergers
-Management buy outs
-Financing expansion
-Turnaround finance
-Refinancing existing business loans

Why consider asset based financing for capital?
-Able to leverage sales growth today
-The lack of flexibility through regular bank financing is no longer an issue
-Revolving credit lines can be secured by your raw materials and finished goods inventory
-Access large amounts of cash that have already been invested in the infrastructure

The Kenya that was in the News

Kenya News:
This week has seen various occurrences i nthe newsfront some political others business. Taking about politics the August House dramatically shot down two government sponsored Bill that sought to increase the number of MPs in parliament through 40 new constituencies and 50 new nominations seat for women.
In Business, as others focused on Safaricom IPO and its attendant problems, others were taking about Mergers and Acquisitions amidst new profitability feats realized by some corporate bodies and much more.

Kenya Parliament:
Acrimony, hostility and bitter exchange of words characterized debate yesterday's debate when the two bills were brought into the house after a morning of lobbying amongst themselves by the goverment side. When the bill was tabled a rather full house parliament was deserted as MPs walked out of the House causing a quorum hitch and when division bell was rang only 95 MPs were there , 50 short of the required 145 (two-thirds).

KenyaWomen:
The dramatic debates that characterized the House when this bill was brought were fun to watch and i couldn't help but wonder where politics of ODM and NARC went to as men ganged up against the women literally (with few excepions though) to shoot down the bill that would have seen the womenfolk get 50 free nomination slots in parliament-without going through the elective process. On the sidewalks i wondered aloud how women would want equality and the likes while asking for favors without fighting it out with men in elective posts. Do they expect the men to dole these free seats just like that especially with their majority vote in parliament?

Kenyan Constituencies:
The other bill that would have seen an increase in the number of constituencies by 40 new constituencies was also shot down on technicality as the requisite two-thirds majority coudnot be raised when the Division Standing Orders of the House can again be introduced 6 months latter which means that elections will be held and women will have to fight it out for more seats for themselves whereas there will be no new constituencies for those who have been waiting with bated breathes.

Kenyan MPs:
The Kenyan MPs have been described as a selfish lot, that would increase their salaries and allowances without bating an eyelid. As you might not be aware, the Statute Law (Miscalleneous Amendment) Bill which seeks to inter alia ratify a pay cheque for MPs as hefty gratuities at the end of current parliament was quickly withdrawn from the order paper amidst the hostility that saw some bills rejected. Talk about parochial selfish interests? what more do we need to know?

Kenyan Fourth Estate:
The news gatherers became the newsmakers as in a rare show of solidarity and unity (Except for KBC Journalists who abhorred the silent demonstration, dont know why???) they took to the streets in a dramatic and the most eloquent of ways-Loud Silence-With their mouths and microphones gagged with masking tapes symbolic of th gagging of the media by the current controversial Media Bill. From local media moguls, leading newcasters, print, radio, cameramen, reporters, mass communication students and supporters as well as foreign media houses, they all hit the streets to petition the president not to ascent the bill.

Kenya Politics:
Politics is a dirty game or so they say and here there are no parmanent enemies or friends. Now this is evident as the politics of the orange gone bitter and the flower about to dry up emerge. One mans woos is anothers blessings and as ODM-Kenya moved house to ODM the original outfit, Kalonzo Musyoka, Ojiambo and Maanzo's team were taken to the drawing board. Moi is closely working with Kibaki, what with the new appoinment as the goodwill ambassador of peace to Sudan. Uhuru is loking for new alliances and sticking his guns in KANU with new work relations with Biwott's Team despite the earlier bitter vourt debacle-Enemies turned friends.
Kibaki's is laughing with more votes to him as the teams fight it out as he hits the road for more votes while dishing out new districts, characteristic of the Moi regime. The dust is yet to settle, politics of oranges going bitter and flowers drying up continue as the dust continue in the haphazard manner the politics of 2007 are indeed entertaining to look at! we remain waiting!

Kenya Business:
Profitability: There are reports that Scangroup Limited has seen its half-year pre-tax profits increase by 30 per cent to Sh116.6 million, up from Sh89.6 million recorded last year due to 54 per cent growth in billings by the advertising and public relations giant and earnings achieved through major acqusitions in advertising firm Redsky— in late 2006 and early 2007. More...

New markets: ScanGroup is also set to enter the Nigerian market by end of the year as growth in the industry peaks, raising investor expectations for better performance in future[More]

Safaricom IPO: The never ending debacle of the Safaricom IPO resurfaced again after the problem sorrounding its shareholding and Mobitelea Ventures Ltd 5% stake acquired in a mysterious circumstance. This time Hon Raila or if you may wish ODM, promises to halt the process in court even as the Treasury continues with the tendering process of the advisory team with yersterday's opening of the technical bids for consultancy services.

AccessKenya contracts: AccessKenya another recently listed firm has struck an interconnectivity agreement with Safaricom that will open the biggest and most lucrative voice traffic to this newly listed firm within Kenya.

Rights Issue: NIC Bank has appointed its investment bank subsidiary, NIC Capital, to act as the lead transaction advisor for its upcoming rights issue as well as Kestrel Capital and Dyer & Blair Investment Bank as the lead stockbrokers for the plan to raise Sh1 billion by selling new shares (rights Issue) to existing shareholders. The money raised will fund the bank’s expansion plans and shore up its capital base. More here...

Expansion/Rights Issue: Olympia Capital Holdings is set to embark on an ambitious expansion plan after the Capital Markets Authority (CMA) approved its plans to raise over Sh400 million through a rights issue.The creation of 30 million new ordinary shares will give existing shareholders the right to purchase 3 shares for every 1 share. More
Coldtusker enumerates more on how to buy shares under a rights issue.

Upgrading: Meanwhile, Olympia Capital Corporation (Botswana) has been granted approval to migrate from its venture capital board to the main board. This effectively means that the company, which is 27 per cent owned by Olympia Capital Holdings (OCH) Kenya, ceases to be classified as a "speculative" investment on the Botswana Stock Exchange. More

Projects: East Africa Portland Cement Company (EAPCC) will shift its energy source from electricity to coal to cut down power bills and operation costs.The move by the cement maker follows recent discovery of coal deposits in parts of Kenya[Here]. Further, EAPCC has launched a Sh1.6 billion project that will double its production capacity in the next one year. The investment comes amid confusion whether the company and Bamburi Cement Ltd, intend to merge to keep off stiff competition.

Mergers/Acquisitions: There were reports that Kenya’s two largest cement producers East Africa Portland and Bamburi have kicked off a process that may see them merge into one of Africa’s biggest manufacturer. Sources say that the two companies have tabled the proposal before Capital Markets Authority (CMA). The law requires the market regulator to approves any takeovers and acquisition of publicly quoted companies.

...and the business world continues to churn more and more news and as investors we receive, assimilate, digest and probably act in them if they are fundamentally useful and...

Have a business week!!!