Kenyan Banks’ Q1 2021 Results
We note expanded balance sheets, increased lending to the government and higher customer deposits
Welcome to The Baobab Weekly where we bring you a succinct summary of key business news from East Africa.
This week, we cover Kenyan banks’ Q1 2021 results, disclosures from Safaricom’s operations in Ethiopia, and Nation Media Group’s proposed share buyback plan.
Kenyan Banks’ Q1 2021 Results
This was a busy week for the banks as over 15 local banks reported their Q1 2021 results. The listed banks that reported were Equity Bank, KCB Group, NCBA, Standard Chartered Bank, I&M Bank, Diamond Trust Bank, and Housing Finance Group. We have a few graphs to highlight the results now that almost all listed banks have reported their earnings:
Some of the non-listed banks that reported this week include: Family Bank, GT Bank, Gulf African Bank, Middle East Bank, Bank of Africa, Prime Bank, and Sidian Bank.
Safaricom’s Operations in Ethiopia
Following last weekend’s announcement of Safaricom’s award of one telecom license in Ethiopia, the company this week released a public announcement detailing its operations in Ethiopia. First, the awarded license is for telecommunications operations in Ethiopia and does not include mobile money operations. The initial term of the license will be 15 years with the right to apply for an additional 15 years.
There are several companies to be formed as a result of the win: Vodafamily Ethiopia Holding (the SPV), Global Partnership for Ethiopia (GPE), and OPCO to be formed. The final shareholding percentages in the OPCO will be as follows: Safaricom (55.7%), Sumitomo (27.2%), CDC (10.9%), and Vodacom (6.2%). Safaricom will hold more than 50% equity in each of these companies.
The main worries are about the stability of the region, the currency controls, and the issue of when the OPCO will get its license to operate mobile money. Safaricom will seek shareholder approval for the creation of these consortium companies at its next AGM slated for 31st July 2021. The share rallied this week on the back of this news.
‘’We are excited for the opportunity to work with the people of Ethiopia to set up telecom networks to deliver a digital lifestyle. In past years, we have seen the power of digital transformation and its impact on our customers. We believe by working with all stakeholders in Ethiopia, we can deliver a similar transformation while achieving a sustainable return to our shareholders.’’
Safaricom’s CEO, Peter Ndegwa.
Find our coverage on the announcement here.
Details on NMG’s Buyback Plan
Nation Media Group announced this week that its Board of Directors had resolved to recommend to its shareholders to effect the share buyback by way of open market purchases through the NSE. A buyback is often an indication that the management thinks the share price is undervalued. Below are a few details on the proposed share buyback, which will be a first at the Nairobi Securities Exchange:
Up to 10% of issued and paid-up share capital as of May 27, 2021, to be bought back (20.7m shares)
The ordinary shares acquired will be held as treasury shares
Minimum price: Par value of an ordinary share
Maximum price: Kshs. 25 per ordinary share
Start date: June 28, 2021, to
End date: The earlier of reaching the 10% threshold or September 24, 2021
The company is expected to spend a maximum of 18% (~Kshs. 518m) of cash and cash equivalents as of the end of 2020 on this buyback.
M&A
Moroccan firm Holmarcom Group, through its holding company Holmarcom Insurance Activities, has acquired a majority stake at Monarch Insurance. This acquisition will make Holmarcom Group the majority shareholder with 51% ownership of the insurance company, along with Kamu Group and Maisha Microfinance Bank. The agreement, which is subject to regulatory approvals, was signed between Mohamed Hassan Bensalah, Chairman and CEO of Holmarcom and Jared Kangwana, Chairman & CEO of Kamu Group,
“The Holmarcom group has an unmatched depth and breadth of experience in the Moroccan insurance market, which is the second-largest in Africa, and its capital injection into Monarch Insurance will bolster our growth and ambition to become a reference player in Kenya’s insurance industry.”
Kamu Group’s Chairman and Chief Executive, Jared Kangwana.
I&M Bank Loan from IFC
I&M Bank Limited, a wholly-owned subsidiary of I&M Holdings Plc, will receive a subordinated loan of up to $50 million from IFC. The loan with a tenor of 7-years and a 5-year grace period is targeted for on-lending to MSMEs (mix of Micro and SMEs). The most significant expected project-level outcome of this disbursement will be improved accessibility to SME finance in Kenya. Beyond the Project, IFC anticipates that it has the potential to promote greater banking sector resilience by boosting the capital adequacy of I&M Bank Ltd, Kenya. This will help the market withstand shocks, contributing to financial market stability. On the non-financial side, IFC will provide additionality through knowledge, innovation, and capacity building in green assets financing to support I&M as it seeks to develop a green assets portfolio in Kenya.
Other noteworthy items:
The Kenyan Central Bank’s Monetary Policy Committee retained the Central Bank Rate (CBR) at 7%.
Moneto Ventures and KOA Save Africa got admitted into the CMA’s Regulatory Sandbox.
Oil marketing companies got KES 1.1B from the Kenyan Government through the Petroleum Development Fund as compensation for keeping fuel prices unchanged in the month to May 14, 2021.
The Capital Markets Authority grants approval to Synesis Capital to register Masaru Unit Trust Fund as a collective investment scheme.