Cheque Truncation Part II

The deadline of new cheque modernization passed this week, on June 1. Yet many bank customers had not yet received new chequebooks, and many more were not fully versed with the process, which entailed a change of chequebooks.

The Kenya Bankers’ Association (KBA) left the public relations of the process to its’ member banks resulting in low awareness and did not communicate till May 31 with adverts in the newspapers re-assuring customers and the public that the old cheques will be used for an indefinite period. This paled in comparison to the introduction of mobile number portability (MNP), in which the regulator (CCK), service providers, and mainly mobile companies carried numerous advertisements about the transition to the new service. (Mobile companies ran extensive promotions to retain their customers or win over their competitors’ subscribers).

There are still many unresolved questions, even with the extenstion:

- Old chequebooks were issued though the month of May, but customers then had to get the new chequebooks at month end. Who bears the cost of printing books that were about to be phased out?
- Do the new cheques clear faster? e.g. 1-day for Nairobi cheques? Speed is important for payments in the age of M-Pesa. The last statistics from the Central Bank (CBK) showed that in 2008, about 50,000 cheques were being cleared daily. Many suppliers now insist on getting paid by M-Pesa (which takes less than a minute) or by real time gross settlement (RTGS a.k.a corporate m-pesa done by banks - but this also carries a high risk of fraud risk of fraud - at 69% of bank crimes)
- What happens to post-dated cheques? These are used for debt repayments and for motor insurance loans (some banks use these for collateral over up to 10 months)
- There is no apparent difference in the design of the old and new cheques. So what has changed to warrant the exercise?
- Are cheque printers (mainly De la Rue) able to print enough chequebooks for a smooth roll out next time?
- Some banks said that old cheques will still be honoured in-house i.e. if drawn to people who also use the same bank, while others told their customers they would not be honored. KBA should communicate a clear deadline when all banks & customers must switch.

For now, the old and new chequebooks are in circulation, but more information has to be provided to resolve the cheque truncation process.

CBK Profits II

Reading the tea leaves at Central Bank

The Central Bank of Kenya (CBK) FY 2009 (PDF) results are out and, compared to last year, it’s a different story.

Banking on other Income: CBK is another institution that has had other income yield great returns. While net interest income was down from 10.3 to 8.4 billion, and commission income on treasury bills and bonds was flat at 3 billion (investors opting for corporate bonds), CBK booked a forex gain of 13 billion ($173 mullion) up from 54 million on revaluation (a 25,000% gain) and 4.8 billion from the controversial $45 million sale of the Grand Regency Hotel. So profit for the year was 23 billion ($306 million), up from 9 billion in the year before, and CBK paid a dividend of 7.2 billion ($96 million) to the Government of Kenya (GoK) (up from 4 billion). And while CBK is exempt from income tax, KRA (the tax man) is not letting go of a Kshs. 22 million employee tax dispute with the CBK.

Make it Rain: Kenya has Kshs. 108 billion (~1.4 billion) worth of currency in circulation (up from 100 billion in ‘08). Currency costs (sourced from De La Rue) were 1.1 billion (~15 million) to produce new notes (up from 330 m).

Generous Creditor: CBK lends to employees at 3% (perks of banking) and charge the government 3% on their overdraft. In a July 07 agreement GoK agreed to pay CBK 1.11 billion p.a. over 32 years at 3% to settle a GoK overdraft dating back to 1997. The CBK act limits the GoK overdraft to 5% of gross recurrent revenue (so currently this should not exceed 17 billion)

UK assets: CBK has 194 billion in assets held with united kingdom banks, that’s even more than Kenya (66 billion), or the rest of Europe (31), and USA (20) while all their 312 billion liabilities are in Kenya. This was even after they increased euro and dollar assets, and reduced sterling pounds, compared to '08.

Loans & Rates: CBK loans to commercial banks stood at 15 billion ($200 million), up from 8.5 billion. They lent money to commercial banks at 8% p.a and earned 6.64% on treasury bills/bonds.

No Gold Standard: CBK gold holdings are just 34 million (less than $500,000) up from 28m year before. In comparison, just this week, India pipped China in the gold race buying $6.7 billion worth of gold from the IMF in hard currency (but is still only 10th largest holder)

CBK Profits

The Central Bank of Kenya last week published for the their ended in June 2008(PDF)

Notes

Return to profitability
- Had a net foreign exchange gain of Kshs. 54 million, compared to a loss of Kshs. 9.3 billion in 2007. This changed the profit picture and enabled the bank to post a profit of Kshs. 8,995 million [9 billion or ~$123 million compared to a loss of 386 million in 2007
- Total income of was Kshs. 14 billion, up from 5 billion. Barclays, Kenya’s largest bank had total income of Kshs. 18.9 billion) up from 5 billion the year before
- Will pay Kshs. 4 billion dividend to the government

Other
- Had staff costs of Kshs. 3. 3 billion (which would be third after KCB and Barclays if compared to commercial banks)
- Commission on sale of government securities dropped to Kshs. 3.1 billion (from 5.2b in ’07)
- Kenya has Kshs. 100 billion (~~1.37 billion) worth of currency circulating, compared to 90 billion in 2007

Vindicates Kimunya
- Currency printing expenses were Kshs. 403 million (down from 1.25 billion in 2007) and something which the former finance minister was crucified for in dealing with De La Rue
- Mentions the $45 million sale of the grand regency for which the payment is tallied

Bank Roundup (June 07)

all banks share capital raised from 250 million to 1 billion. At the beginning of the year, 25 of 43 banks were below this mark (with 7 banks below 500 million). This is an update/reversal of an older proposal to lower the share capital when some banks were struggling a few years ago. Not many mergers expected though it may prompt some mid size banks to go for a public listing to raise cash (only 3 banks lost money last year)

Central bank has advertised for some currency destruction contracts as the east African reports on talks for the government to invest in the current currency supplier DE La Rue

Diamond Trust to venture into Islamic Banking

East African Development Bank profit went up by 229% to $4.6 million – up from $1.4 million the year before. Assets increased to $262m dollars and their non-performing portfolio reduced by 11%

Equity bank won an international award – the 2007 global vision in microfinance award. Also KTN reported that the that the bank will open three women only branches in Nairobi

Two month old Family Bank is seeking a new managing director

KCB to expand into Uganda as it also wins an international award – the Africa investor for best performing stock in Africa award (shares price up 97% ) > but the company also held one of the longest dreariest AGM’s in history on Friday

National bank finally got recapitalized. NBK could receive 346 million in 2007 and 2008, a bullet payment in 2009 of 4.3 billion, 220m in 2010 and 2011 and another bullet payment of 5.2 billion in 2012. For 2013 - 2015 123m each and in 2016 a lump sum of 5.2b. 2017 to 2020 58m each and a final payment of 6 billion – for a total of Kshs. 22.48 billion ($340 million)

NIC to increase authorized share capital via a rights issue. The board approved it on June 14, but there was no mention at the AGM on May 16. This follows a Fitch Report indicating that mid-size Kenyan banks need to increase their capital

opportunities

East African breweries is accepting applications for a graduate management program. Details online and D/L is 22/6

Family bank: chief executive officer, credit manager. Apply through deloitte - esd@deloitte.co.ke by 29/6

Kenital solar : sales & marketing manager, technical manager, engineer sales executives (5) regional managers (4). Apply to cm@kenital.com by 22/6

Country manager at Steadman Tanzania . Apply to janis@steadman-group.com by 22/6

A dozen IT, research and engineering jobs at Safaricom

Writers at a new Swahili newspaper. Apply to gazetijipya@gmail.com

Project management specialist at USAID.apply to hrnaiorobi@usaid.gov

Rhodes scholarships: 2 for Kenyans to pursue full time post graduate study at the University of Oxford. Apply to rhodeskec@wananchi.com by 15/9

Real estate: for the monied in the Diaspora, those who have worked hard and are looking to return in style, consider investing in Kihingo village a gated community development in Kitusuru where prices start at $500,000.

Anglo Currency

One year ago today, The Sunday Standard
reported on an attempt to swing the contract to print Kenya’s currency towards French firm, FranÁois-Charles Oberthur Fiduciaire, which had previously been sub-contracted by Anglo Leasing to print "new generation passports" for the Kenya government. Eventually, De La Rue retained the contract, which they have held since independence.

PR/media campaigns

De La Rue
Thomas De La Rue, who print the currency for Kenya and many other countries have launched a PR. campaign at a time when their contract to print Kenya’s currency is up for review. De La Rue point out that they have invested in a 3 billion shilling factory in Nairobi where they print many world currencies, employ 300 trained Kenyans and contribute 600 million shillings annually to the Kenyan economy.

De La Rue have printed Kenya’s currency since independence, but have faced stiff competition from new companies and politicians, including one arm of Anglo-Leasing.

Italians at the Coast
Italian Residents of Malindi and Coast Province have also launched a PR campaign to refute allegations that they engage in drug trafficking and prostitution activities. They point out that they are responsible for 85% of the tourism business in Malindi, and are behind numerous community & charitable activities. Also that, out of the 1,000 Italians on the island, only 5 have been investigated for criminal activities over the last 27 years

Boycott Delamere
There’s a chain mail going round urging Kenyans to boycott Delamere products following the controversial dismissal of murder charges against Delamere’s grandson who had shot and killed a Wildlife ranger.

Mo Money
Foreign Affairs Minister, Chirau Ali Mwakwere wants the High Court to increase the 3 million shillings awarded to him following a successful defamation suit against Royal Media Services.