Exit Oigara, Enter Russo
KCBโs New CEO
๐ Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.This week, we cover Banking Q1 2022 Results and Parliament's Finance Committee Report on the Finance Bill 2022.First off, enjoy our weekly business news in memes brought to you by DTB Kenya:
KCBโs New CEO
New at the helm: Last week, KCB announced Paul Russo as the new KCB Group CEO, taking over from Joshua Oigara who has led the Group for the last 9 years. Russo has been NBKโs Chief Executive since 2019 after its acquisition by KCB. Here is KCBโs share price performance during the Oigara era:
Q1 2022 results: In the same week, KCB reported its Q1 2022 results. The bankโs loans grew by 18% to KES 704.4B while customer deposits grew by 13% to KES 845.8. Net income was up 55% to KES 9.9B backed by a 47% growth in non-interest income growth. The bank has increased its holdings of government securities by 33% over the past year to KES 281.8B with the balance sheet size growing 19.3% to KES 1.2T. Find the results here.
Going Digital: The waiver on bank-M-Pesa transactions that was instituted as a Covid economic relief measure saw mobile service revenues fall 16% to KES 2B in Q1 2022.ย That did not however stop the total revenues from digital channels from growing 65% to reach KES 2.7B.
Looking ahead: It will be interesting to see the direction in which the new CEO takes the firm, especially in comparison with its peer Equity Bank.
Absa Majority Shareholder Waives Dividend
Q1 2022: Absa Bank Kenyaโs asset base grew by 14.2% to KES 438.4B with customer deposits growing 4.8% to KES 269.5B. Loan loss provisions fell by 15.2% to KES 1.1B, boosting net income to KES 2.9B. Find the results here.
Dividend Waiver: ABSA Group, the majority shareholder of Absa Bank Kenya, announced that it had waived KES 1.47B from its subsidiary, to strengthen its capital position. The amount is 35.82% of its FY 21 dividend share.
"I am pleased to inform shareholders and other stakeholders that Absa Group Limited, the majority shareholder in Absa Bank Kenya PLC, has made a decision to waive a portion of its 2021 final dividend. The majority shareholder has decided to waive KES 1.47B, representing 35.82% of their 2021 final dividend entitlement. The reason for the waiver is to further strengthen Absa Bank Kenya PLCโs capital position in support of its business requirements in the short to medium term.โ
Absa Group Chairman, Charles Muchene
Kenswitch Partnership: Absa Bank has entered into a partnership with Kenswitch that will allow Absa customers access to over 2.2K ATMs on the Kenswitch Network. For Kenswitch, its 10M+ members will be able to transact on Absaโs ATM network countrywide.
Coop Bank Promises Higher Dividend
Higher Dividend promised: Coop bank CEO has promised shareholders at the AGM a higher dividend this year contingent on smooth general elections and good performance this year:ย
โLike I said earlier with the much better performance now โฆ this time next year the chairman will be here possibly supporting a much better dividend than we are paying today. With the good performance weโve seen already with the KES 7.7B profit before tax in the first quarter all things equal โฆ I know the board chairman will not shy to recommend a higher dividend this coming yearโ- ,โ CEO Gideon Muriuki
Focus on Kenya: Significantly, the bank will not be pursuing regional expansion having had some tough experiences abroad and will concentrate in Kenya.
Q1 2022 Results: Co-operative bankโs net profit was up 68.8% to KES 5.8B because of reduced loan loss provision which was down KES 737M and the bank booked a deferred tax of KES 306.9M. Their investment in government securities was up 10% to reach KES 183.3B. The bank's total assets grew by 7.9% to KES 596.9B which returns the banking group to the countryโs third-largest by assets surpassing NCBAโS KES 587B.ย
Kingdom Bank: This bankโs subsidiary, Kingdom Bank, performed well in Q1 2022 with net Income up 58% to KES 209.7M. However, the Loan book shrank by 9.8% to KES 4.6B even as investments in government securities grew 6.4% to KES 24.3B. The asset base expanded 1.4% to KES 32.1B. Find more analysis here
I&M Group in M&A Deal
Done Deal!: I&M Group has completed the acquisition of the remaining 35% of shares in l&M Burbidge Capital Limited,ย their corporate finance advisory arm. This makes Burbidge a wholly-owned subsidiary of the bank.ย
โThis transaction was approved by the Company's Board in accordance with the authorization granted by its shareholders at an Extraordinary General Meeting held on 27th June 2016.โ - Press Release
For FY 2021, I&M Burbidge Capitalโs revenues were down 13% year on year with a Loss Before Tax of KES 9M.
Q1 2022 Results:ย I&M increased its holdings of Kenya government securities by 14.5% to reach KES 83B with loans growing 8% to KES 162.1B, pushing the balance sheet 9.8% higher to KES 310.7B. Profit After Tax grew 21.6% to KES 1.7B. The bankโs total Interest Income was up 14.8% over the year to KES 6.2B.ย
A win Vs KRA: The I&M Group annual report shows that it has won a tax dispute over KES 231.2M excise duty assessment covering the period from Jan 1 2014 to Sept 30 2018.
Finance Bill 2022
Parliament's Finance and Planning Committee published its updated version of Kenyaโs Finance Bill, following a period of public input on the Treasuryโs version of the bill. Here are some of the key changes that were made in the Bill: :
VAT on Flour: The Committee rejected proposals that aimed at introducing VAT on maize, cassava, and wheat flour noting that these proposals would add an unnecessary burden to Kenyans.ย
โThe increase of tax on basic commodities such as maize flour, cassava flour, among others was also opposed by most stakeholders because it will further increase the cost of living for the common mwananchi.โ
Tax Appeals: The committee threw out proposals to amend the Tax Tribunals Act to have 50% of the disputed tax amount deposited as security pending litigation on grounds that the move would erode working capital.
โThe committee observed that the requirement to deposit 50% of the disputed amount before filing an appeal in the High Court will reduce working capital for businesses and also deny justice to taxpayers where they are unable to raise the amount. The committee, therefore, recommends that the clause be deleted."
Inflation Adjustment: The proposal to have inflation adjustment undertaken every 2 years was adopted to allow for business recovery.
Betting Excise Duty Tax: The committee rejected the proposal to impose a 15% excise duty on betting advertisements by media houses. It instead proposed the adoption of a reduced 5% tax citing existing regulations on the betting industry.
Capital Gains Tax: The Committee proposed CGT at 10% versus the Treasury's proposal of 15%.
Liquefied Petroleum Gas: Proposal to reduce VAT on LPG from 16% to 8%.
Find the report here.
What Else Happened This Week
๐ง Infrastructure Bond: The CBK is in the market to raise KES 75B through an 18-year Infrastructure Bond. The sale is expected to run from May 23 to Jun 7. IFBs are lucrative given their high return and tax-free status. The coupon rate for the last IFB floated in Feb was 12.965%. [CBK]
๐ฐ Debt Treadmill: Reports indicate that the National Treasury has borrowed KES 138B in the year's first four months. The debt has mostly been contracted from bilateral and multilateral lenders in what is a shift from expensive commercial borrowing. [Nation]
๐พ Data is King: NEMA is seeking public input in its Environmental Impact Assessment of Airtelโs proposed landing of the 37K km 2Africa Marine Cable Project in Mombasa. Earlier this year, Telkom successfully landed the 15K km long PEACE cable in Mombasa - barely two years after landing 5K km DARE 1. [Mwango Capital]
๐ฑ Crypto Adoption: Last week, the Tanzanian parliament was debating the modalities of CBDC use in Tanzania. The stance toward crypto has changed significantly under its new President Samia Suluhu. Africaโs maiden Bitcoin adopter, the Central African Republic is also mulling a Crypto Economic Zone. [Bloomberg]
๐ฆ Banking Report: The Central Bank of Kenya has released its Annual Supervision Report 2021. [CBK]
๐ Eveready: In its results for the 6 months ended Mar 31, 2022, the battery manufacturer reduced its loss by KES 17.4M to KES 7.7M while revenue increased by 23.6% to KES 41M.ย [Mwango Capital]
Interest Rates Watch
Nigeria: In an action to stem rising inflation that reached an 8-month high of 16.82% in April, the Central Bank of Nigeria has hiked by 1.5% to 13%, its first since 2016.ย
Kenya: The Monetary Policy Committee is set to meet on Monday, May 30; under the context of rising interest rates globally as central banks move to tame inflation. The KBA has asked the CBK to increase rates from the current 7.0% to avert inflationary pressure. Currently, inflation stands at 6.47%.ย
Charts of the Week
