Pages

Friday, July 31, 2015

Kenyatta bank invests in Sh11bn real estate firm

Money Markets
Commercial Bank of Africa Centre in Upper Hill, Nairobi.  PHOTO | FILE
Commercial Bank of Africa Centre in Upper Hill, Nairobi. PHOTO | FILE 
By GEORGE NGIGI, gngigi@ke.nationmedia.com
In Summary
  • The lender booked a gain of Sh586 million from the consolidation transaction which in turn reduced its shareholding in CBA Properties by 24 per cent.
  • CBA said the transaction was to enable it concentrate on its core business of banking, advisory and bancassurance.
  • Mutuya Holdings, which had net assets of Sh11.1 billion as at end of last year, will be treated as an associate company of CBA.

Commercial Bank of Africa invested Sh2.3 billion in a little-known Sh11 billion property company last year as it sought to diversify its income streams.
The bank, the largest privately owned lender in Kenya and associated with the Kenyatta family, bought a 24 per cent stake in Mutuya Holdings Ltd in a share swap transaction.
It is not clear which properties Mutuya holds — as well as who its other shareholders are — but the Kenyatta family owns a vast estate including land, commercial buildings, hotels and schools.
“An opportunity for CBA Properties Limited to merge with a related company, Mutuya Holdings
Limited, emerged in the last quarter of 2014. The transaction saw the two businesses merge and swap shareholding in proportion to their value of property assets,” reads the bank’s annual report.
CBA has just more than 30 shareholders. The lender booked a gain of Sh586 million from the consolidation transaction which in turn reduced its shareholding in CBA Properties by 24 per cent.
The bank owned 100 per cent of CBA Properties and held a constant investment of Sh23 million in the subsidiary from 2011. The firm was managing the bank properties, CBA Centre in Upper Hill and CBA Building on Wabera Street in Nairobi.
CBA said the transaction was to enable it concentrate on its core business of banking, advisory and bancassurance.
Mutuya Holdings, which had net assets of Sh11.1 billion as at end of last year, will be treated as an associate company of CBA.
The lender also operates a brokerage, CBA Capital and insurance agency.
Last year, CBA raised an additional Sh1.7 billion from its shareholders through a rights issue and also borrowed Sh7 billion from the public through a corporate bond. The bank is paying an interest rate of 12.75 per cent for the five-year debt.
The cash injection was to boost the bank’s capital position and ensure compliance with new adequacy ratios that were coming to play past January even as it grew its business.
CBA joins mortgage lender Housing Finance in owning a property company. HF owns Kenya Building Society which contributed 15 per cent of the lenders pre-tax profit in 2013, one year after its activation.
Kenya’s real estate sector has been vibrant in the last decade proving a cash cow for developers and property managers.
CBA also owns a third of AIG Kenya Insurance which earned it a profit of Sh238 million last year.

The bank was last year upgraded to a top-tier lender after it grew its market share to 5.1 per cent riding largely on its collaboration with Safaricom for its mobile platform product M-Shwari.
CBA has regional operations in Uganda and Tanzania and has made public its ambition to have presence in 16 markets in the next 10 years with its immediate attention being on Rwanda and troubled Burundi.
Other markets the bank targets are Ethiopia, South Sudan, Democratic Republic of Congo, Malawi and Mozambique.
The lender reported a 9.6 per cent drop in after tax profit last year to Sh3.4 billion. In June it introduced interest rewards for current accounts as it seeks to grow its deposit levels and increase transactional commissions.

No comments:

Post a Comment