Money Markets
Commercial Bank of Africa Centre in Upperhill, Nairobi. FILE | PHOTO | NATION MEDIA GROUP
By GEORGE NGIGI
In Summary
Commercial Bank of Africa’s capital has slipped below
the statutory adequacy level following fast growth in the three months
to June, a position that requires the lender to raise billions within
the next few months.
Share This Story
The bank’s total capital to risk weighted assets, largely
made up of loans, stood at 11.14 per cent against the statutory 12 per
cent. The ratio is meant to tame the risk appetite of lenders so that
they do not over expose themselves.
CBA’s retail business has shot up following introduction of M-Shwari in partnership with Safaricom,
a mobile money platform which allows users to save and borrow. In June
CBA started allowing M-Shwari customers to put fixed deposits in their
phone accounts.
“It is our intention to be always compliant and we
are working on it,” said Commercial Bank of Africa managing director
Jeremy Ngunze who declined to divulge details of how they intend to
raise capital.
The private bank associated with the wealthy
Kenyatta family has the option of raising cash from its deep-pocketed
shareholders through a rights issue or securing subordinated debt.
With the current loan book, the bank needs to raise
a minimum Sh1 billion to be compliant and at least Sh3.5 billion to
comply with the new capital requirement which come to effect at the end
of the year.
CBA loan book grew by Sh15 billion in the three
months to June, a pace faster than previously recorded by the lender
which has grown its loans by an average Sh3 billion each quarter in the
last two years. Its customers deposits went up by Sh16 billion. Mr
Ngunze attributed the fast growth to conclusion of deals that had been
in its pipeline.
During launch of M-Shwari, CBA’s management had
moved to allay fears that the new business would strain its capital
adequacy arguing that its shareholders were deep pocketed and able to
fund the growth.
Last year, CBA overtook Equity Bank as the lender
with the highest tally of loan accounts buoyed by the growing number of
subscribers to M-Shwari. CBA’s loan accounts grew to 897,000 last year
up from 89,000 in 2012.
Despite the growth in its core business CBA
recorded a 16.2 per cent drop in after tax profit following poor
performance by its regional subsidiaries. The bank reported a Sh1.2
billion after tax profit in the year to June compared to Sh1.4 billion
in a similar period last year. The bank operates in Tanzania and Uganda,
recorded a 22.5 per cent profit growth in Kenya to Sh1.6 billion which
was, however, wiped off by the regional business.
Mr Ngunze declined to give details of the subsidiaries performance. CBA Uganda started operating last year.
Mr Ngunze declined to give details of the subsidiaries performance. CBA Uganda started operating last year.
CBA joins First Community and Consolidated Bank in
falling below the line. Government owned Consolidated Bank fell below
the adequacy levels at the end of last year and saw its loan book shrink
as its market aggressiveness was checked.
The Treasury had promised to pump Sh500 million
into the bank but has not honoured the promise. It has said it intends
to privatise the bank by bringing on board a strategic investor and also
offering some of its shares to the public.
No comments :
Post a Comment