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Barclays Posts Flat Quarterly Profit Following Re-branding Costs

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Barclays Bank Kenya has posted Sh1.9 billion in earnings for the first quarter ended March 2019 following rebranding costs to ABSA.

Had it not incurred the expense which totaled Sh234.4 million, the bank’s net profit for the period would have risen to about 10 percent; more than Sh2 billion.

Investments in new banking systems and transitional service agreement costs for the provision of several services under the impending separation make up the additional costs.

The lender has disclosed that as part of its separation from Barclays Plc, based in London, it plans to spend billions of shillings for the rebranding of its branches and stationery while also refitting IT systems. This expenditure will affect its earnings for two more years.

“In 2019, the bank’s separation program will involve immense investments and implementation of over 70 technology-specific projects, which will further eliminate service dependency on Barclays Plc and move the bank to superior efficient, robust and customer-centered systems. I am happy to report that all technology changes achieved so far have been implemented with minimal impacts on our customer,” said Barclays Kenya Managing Director Jeremy Awori.

“The separation from Barclays Plc will have an impact on Barclays Kenya’s financial results over the next two years”.

Despite having separation costs eat into its year to date earnings, Barclays’ saw its other performance indicators remain on course for growth. This was shown largely by the increase in both interest and non-interest funded income.

The bank’s total interest income stood at Sh7.4 billion; reflecting a 7.1 percent growth. This is as investment in government bonds and T-bills rose 24 percent to Sh83.1 billion. On the other hand, non-interest income which includes commissions and fees increased by 14 percent to Sh2.5 billion.

Barclays’ interest expenses jumped 38.8 percent to Sh2 billion which is a partial reflection of a 15.8 increase in customer deposits which stood at Sh15.4 billion.

In addition, the bank’s operating costs dropped marginally to Sh4.9 billion, which was a boost to its bottom-line. Loan loss provision was increased by 10.6 percent to Sh636.6 million while gross defaults grew 22 percent to Sh15.4 billion.

ABSA, Barclays’ parent company, will be expected to help absorb part of the separation expenses through either the provision of capital or forfeiture of part of its dividend entitlement.

This arrangement is designed to assist the lender to maintain dividend payouts to minority shareholders over the transition period.

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Sh1,000 Notes Abroad to be Exchanged in the Country, CBK Says

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Patrick Njoroge, the Central Bank of Kenya (CBK) Governor, has urged those with the old Sh1,000 notes that are out of the country to exchange them in Kenya before the October 1st deadline elapses.

The Governor dismissed permitting conversion of the old currency outside the country, adding that the CBK had alerted all foreign banks to cease recognition of the old notes.

He further said that banks outside the country will not be receiving any new notes to aid in conversion, contending that this would defeat the process of demonetization.

“If you have the Kenyan currency and you happen to be outside the country, there is only one way to get value for it before October 1. You have to take a trip here and go through the procedures outlined in the Gazette notice and subsequent releases,” said Dr. Njoroge when speaking at a press briefing yesterday.

“You cannot convert it to any other currency out there since this would defeat the process of demonetization.”

Earlier this month, notices were issued from the Bank of Tanzania and the Bank of Uganda discontinuing the conversion of the old currency in their banks. In addition, they have directed their countries’ banks to apply more stringent due diligence processes to all currency flows.

The procedures to be followed for currency conversion by locals will also be followed by those coming into the country.

Dr. Njoroge has warned that measures have been put in place to thwart any efforts to clean illicit money in nations involved in significant financial transactions with Kenya.

After the East African Community allowed free movement of goods and people across member states, the Kenyan shilling is frequently used in business transactions in neighbouring countries.

The result is that this money comes back home through those trade routes and official currency repatriation mechanisms between central banks of countries in the Community.

He also said that the deadline will not be extended, arguing that an extension would create a loophole for those seeking to clean their dirty money to do so.

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Safaricom and Equity in Deal to Offer Loans to Contractors

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Safaricom contractors that may find themselves short on cash will now be able to access as much as Sh200 million in unsecured short-term loans following a deal between the telco and Equity Bank. This will help the contractors to maintain cash flow positions before receiving payment for their services.

The firm wrote a letter addressed to its business partners in which it said that the aim of the deal is the creation of a more procurement-ready business. The main beneficiaries will be Safaricom dealers, suppliers, and agents.

In the fiscal year ended March 2019, Safaricom had 440 dealers, 156,000 M-Pesa agents, and 1,164 suppliers.

“We are pleased to inform you of our partnership with Equity Bank which will offer our partners financing solutions linked to purchase orders and invoices,” said Francis Murabula, Safaricom’s head of supply chain management, in the letter.

He is asking the dealers, suppliers, and agents for consent to share their information including contact details, invoice and purchase order information to enable loan processing for potential firms.

Contractors will be able to borrow from Equity before or after they fulfill their contractual obligations with Safaricom.

The terms and amount of the loan applied for will depend on each company’s credit rating.

Therefore, for a contractor to qualify for an unsecured loan of up to Sh200 million, they have to be using unpaid accounts for goods and services that have already been provided to Safaricom as their collateral.

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Kenya’s Victoria Bank Appointed to Invest Sh1.5bn in Fin-tech Start-ups

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Victoria Commercial Bank (VCB), based in Kenya, has been appointed to oversee the investment of a Dubai-based equity fund’s kitty worth Sh1.5 billion in African and Asian financial technology startups.

This will see 1.7 million customers hailing from several countries including Bangladesh, Kenya, Ghana, Nepal, Tanzania, Sri Lanka, and India benefit from the Nimai Emerging Financial Services Fund (NESF) facility.

“The markets were chosen based on the existing (fintech) presence and experience. It integrates investment expertise with deep operational capability and resources,” said a joint statement.

According to Yogesh Pattni, the VCB chief executive, the deal presents an opportunity for a stronger partnership with Nimai Capital. The latter recently set up a kitty worth Sh1 billion to fund onward lending to enterprises operated by women.

Housing finance, insurance, microfinance, banking, and retail are some of the technology mobility-enabled emerging financial services opportunities that will receive investment from the fund.

Pankaj Mundra, NESF’s co-founder and managing director, expects VCB’s extensive understanding of the Kenyan market and business experience to be of benefit to the fund.

“We look forward to working with Victoria Commercial Bank to source and develop investment opportunities for the Fund across East Africa,” said Mr. Mundra.

The benefits to be enjoyed by investee firms include expert financial advice from line companies, system integration with Indian fintech firms and access to financial services from the diaspora.

“We have a firm belief that the fund will make a significant and positive impact in the lives of millions of families in addition to generating appropriate financial returns for investors,” the statement added.

A proven track record is a condition for start-ups to access funding.

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