Barclays Bank

Comparative Analysis of Barclays, KCB & Stanchart

FINANCIAL STATEMENTS:
Barclays Bank’s Annual and Quarterly Financial Statements
Standard Chartered Bank’s Annual and Quarterly Financial Statements
KCB’s Annual and Quarterly Financial Statements

Profitability
Barclays recorded the highest profit before tax (PBT) of ksh.7.1 billion followed by Standard chartered with Ksh.4.9 billion and KCB with Ksh.4.2 billion. KCB and Standard Chartered registered impressive growth levels of 33% and 29% in PBT compared to Barclays 9%.

Reason for profitability difference
KCB’s impressive growth was attributed to a 42% increase in loans and advances to it customers given their wide branch network and aggressive marketing. Its operational expenses rose by 20% as the bank opened 11 branches across Kenya and a new subsidiary in Kampala Uganda.

Standard Chartered Bank’s remarkable growth is attributed to a 49% rise in foreign exchange income. However the bank had a rise of 23% in operational expenses as it opened 2 new branches and increased its number of employees.

Barclay’s dismal growth in PBT is attributed to a 43% rise in operational expenses. The bank increased its network by 95 new Automatic Teller Machine (ATM),47 branches and 3,003 employees.

Balance sheet reviews
Standard chartered has a healthy balance sheet and recorded the lowest cost to income ratio of 46% followed by Barclays at 59% and KCB at 65%.This means that Standard chartered is able to generate more income at a lower cost

Lending Capacity
Standard chartered is able to lend more as its gross loans and advances to deposits ratio stood at 56% compared to Barclays whooping 99% and KCBs 77%.In essence Barclays has lend out most of the customer deposits.

BARCLAYS BANK OF KENYA LIMITED
Barclays Bank of Kenya Limited, a subsidiary of Barclays PLC, was incorporated in Kenya in 1978 and listed on the NSE nearly a decade later in 1986 . Currently, Barclays has over 107 branches and 193 automated teller machines across Kenya. The Bank’s services include corporate banking, retail banking, credit card business and treasury services. Barclays is the largest bank in terms of assets and the most profitable bank in Kenya.

Barclays bank has an aggressive branch expansion strategy into the rural areas to reduce its overdependence on urban customers. The bank is thus doing away with high end banking in favour of small savers and borrowers. The bank has retained over Ksh.2.5 billion from its previous earnings to finance its expansion. This has seen them open 45 more branches with an additional 86 ATMs in Kenya while their labour grew to over 6,900 personnel.

The bank has also embarked on an aggressive lending scheme that has made their loan book to increase by more than 25% in 2007. This increased lending was rewarded by its revenue growing to Ksh.18.9 billion in 2007 from Ksh.15 billion in 2006, most of it from loan interests.

Among other very innovative products and services, the bank pioneered the concept of unsecured retail lending and Islamic banking in Kenya. Barclays has a high liquidity ratio of 36.2%, higher than the statutory minimum of 20%. It currently holds a market share of 30% in Kenya. On the stock market, Barclay’s shares are some of the most sort after and are popular with both institutional and retail investors.

Of recent Barclays bank has been faced with very stiff competition from other bank in the sector. The Kenyan banking sector has become highly competitive with 49 banks and counting. Banks such as Equity, Family Bank, K-rep Bank, Kenya Women Finance Trust and other microfinance related banks are putting up a very spirited fight against conventional banks such as Barclays in the low-end client’s niche. The bank is also facing a credit risk as its loans and advances have gone up significant. The bank reported a very marginal profit growth in its 2008 quarter one financial results.

Barclays 2007 Financial Review
Barclays operating income grew by 25% to Ksh.18.8 billion, up from Ksh.15.1 billion in 2006 and Ksh.14.3 billion in 2005. This was attributed to 42% growth in loans and advances to customers. The bank made Ksh.2.3 billion in interest income from loans and advances, Ksh.745 million from Government securities and Ksh.283 million from foreign exchange income

BBK operating expenses grew by 43 % to Ksh.11.1 billion, up from Ksh.7.8 billion in 2006 and Ksh.7.5 billion in 2005. The bank added 95 new Automatic Teller Machine (ATM), 47 branches and 3,003 employees, majority of whom are direct sales agents

Although a significant rise in operational expenses ate into BBk’s profits during the year, the bank reported a 9% increase in profit before tax to Ksh.7.1 billion, up from Ksh.6.5 Billion in 2006 and Ksh.5.4 billion in 2005. The bank proposed a final dividend of Ksh1.65 consistent with what it paid out in 2006.

The banks total Assets grew 34% to Ksh.157 Billion up from ksh.117 billion in 2006 attributed to the increased expansion witnessed during the year.

KENYA COMMERCIAL BANK
Kenya Commercial bank was renamed from National and Grindlay Bank in 1970 after the government acquired 100% stake in the former. This was in the process of nationalizing banks in Kenya to make them accessible to more Kenyans after independence. In 1972, Savings & Loan (K) Ltd (S&L) was acquired to specialize in mortgage financing. To date, the government has reduced its shareholding in KCB to 24% through listing and rights issues. The government’s shareholding may further be reduced if it does not participate in the on going rights issue.

Over the year, KCB faced some difficult time due to mismanagement and political interference. The bank has however since 2003 returned to profitability and is currently one of the most profitable banks in Kenya.

KCB’s vision is to become the leading bank in the East African region. The bank has been on thus been on an aggressive regional expansion strategy that has seen them open branches in all countries of the region. Currently the bank has five branches in Tanzania (3 in Dar-es-salaam, 1 in Arusha and 1 in Mwanza), one in Kampala – Uganda and one in Juba – Southern Sudan. There are extensive plans to move to Rwanda and Burundi.

KCB is also planning to open more branches in rural areas as part of its expansion program. The bank expects to have 60 branches and 50 more ATMs across the region by the end of this year, most of them in the rural areas. KCB has recorded consistent growth in both business volumes and profitability over the past five years leading to growing optimism among its stakeholders as to its future prospects.

In their bid to expand regionally the bank is planning to raise Ksh.5 billion through a rights issue. The bank’s shareholders will seek to increase its share capital from the current Ksh.2 billion to Ksh.2.4 billion by creating 400 million ordinary shares of Ksh.1.00 each. A consortium of Standard Investment Bank and Faida Investment Bank has been appointed transaction advisors. Walker Kontos and Ernst & Young will be the legal advisors and issue’s reporting accountants respectively.

150 million of these newly created shares are expected to go to an Employee Share Ownership Scheme (ESOP) that the bank wants to introduce. The bank will also consider cross listing its shares in Tanzania and Uganda. If approved, the bank hopes to cross-list in the third or last quarter of the year.

The bank has changed their website address from www.kcb.co.ke to www.kcbgroup.com to give it a more regional look.

At the NSE, KCB is one of the most liquid counters with millions of shares traded everyday. However it’s over expansion has stretched some of its financial ratios necessitating a further capital injection in the group. The banks lending capacity has been affected adversely. If this is not improved soon, it may give its competitors a chance to gain control of the banking sector’s lending business amidst shrinking interest in income margins.

On the whole, KCB is one of the strongest counters at the NSE and with increased profitability from the new branches in the region; the bank is poised for bigger things. If it manages to get a bigger share of both the Ugandan and Southern Sudan banking sectors, edging out Barclays and Stanbic Uganda, KCB will become the biggest bank in the region.

KCB 2007 Financial Review
For the year ended December 2007, KCBs operating income increased by 22% to Ksh.14.1 Billion up from Ksh.11.5 Billion in 2006. The banks net interest income contributed Ksh.2.1 Billion, fees and commissions contributed Ksh.710 million, while incomes from foreign exchange transactions chipped in Ksh.839 million.

At the same time, the banks operating expenses rose by 20% to ksh.9.4 Billion from Kshg.7.8 Billion. This was mainly attributed to enhanced business activity, marketing, and improvement of customer service initiatives.

KCB’s Profit before tax, for the period under review, increased by 33% to Ksh.4.2 Billion up from Ksh.3.2 Billion in 2006. There was significant increase in profitability of the banks foreign subsidiaries which together contributed of 268 Million to the net profit. The banks net loans and advances to customers grew to Ksh.64.3 Billion in 2007 from ksh.45.3 Billion. Customer deposits went up by Ksh.17.2 Billion to Ksh.94.4 Billion from 77.2 Billion

The bank proposed a final dividend payout of ksh.0.70, which represent a 17% increase over dividends awarded in 2006.

STANDARD CHARTERED BANK
Standard Chartered Bank (SCB) in Kenya opened its first branches in Kenya in Nairobi in January 1911. The parent company of SCB Kenya is Standard Chartered Bank PLC (with a 74% holding) a company incorporated in Great Britain. Currently the SBC Kenya has a diverse network of 30 branches and a network of 62 ATMs strategically located in Kenya, with over 2,000 employees. The Standard Chartered bank is among the largest commercial banks in Kenya.

In sub-Saharan Africa, Standard Charted has more than 130 branches, in 13 countries. SCB Kenya falls under the East Africa Area with Tanzania and Uganda. The Area General Manager for East Africa is presently also the Managing Director of the Kenya business. The Bank is organized in three business divisions: - Corporate and Institutional (C&I), Consumer Banking (CBD) and Global Markets.

SCB Kenya has invested in an elaborate integrated electronic platform, which offers a single point of access across cash, trade and foreign exchange. Its products include Foreign Currency, Safari Savings, Safari Junior, Diva and All-in-One Account.

SCB has been paying one of the highest dividends on their shares, attracting both institutional and retail investors. For the period ended December 2007 the bank announced a Ksh.10 dividend per share, out performing its industry peers. The bank has been registering impressive profit growth over the years despite its reduced lending volume. In the first quarter of 2008, the bank’s pre-tax profit increased by 25%.

SCB is still highly dependant on to the higher net worth clients and this could turn to be the bank’s undoing as other industry players compete for the unbanked Kenyan population. Unlike KCB and Barclays SCB bank has made very marginal effort to expand to the rural areas and has only opened six new branches in the last two years. Most of their branches are only opened in Kenya’s major cities.

SCB has a very strong financial base and this is bound to remain so in the foreseeable future. Its reduced loan loss provision indicates reduced risks from unrecovered loans, although this has reduced their interest income significantly.

SCB 2007 Financial Review
In 2007, Standard Chartered operating income grew by 20% to Ksh.9.5 Billion, up from Ksh.7.9 billion in 2006 and Ksh.7.5 billion in 2005. This was mainly due to a 49% growth in incomes generated from foreign Exchange trading, which increased to Ksh.1.3 billion from Ksh.800 million in 2006.

Other injections into the banks revenue included: incomes from fees and commissions that increased by 6% to Ksh.2.1 billion; net loans and advances to customers grew 5% to Ksh.39.5 billion, up from ksh.37.4 billion in 2006 and Ksh.34 billion in 2005, this was mainly driven by growth in mortgage and personal loan products by 38% and 48% respectively.

The banks total operating expenses for the year increased by 23% to Ksh.4.4 billion from Ksh.3.6 billion in 2006 and ksh.3.4 billion in 2005. The bank opened two new branches and increased the number of employees to over 2,000. The banks investments in government securities reduced by 7% but 218 million gains attained.

The introduction of products like the Safari savings, Safari junior, Diva and All-in-One Account saw the banks customer deposits grow by 14% to ksh.73.8 billion from ksh.64.9 billion in 2006 and Ksh.59.7 billion in 2005.

Profit before tax went up 29% to Ksh.4.9 billion from ksh.3.8 billion in 2006 and Ksh.3.5 billion in 2005. SCB has been able to generate more income at a lower cost with its conservative expansion strategy. The bank proposed a total divided of Ksh.10 per share up from Ksh.8.50 in 2006 and ksh.7.50 in 2005.

Related Links:

• No Related Links