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Saturday, October 25, 2008

Kenyan Banks - Raising Capital

HFCK raised KES 2.3bn & just in the nick of time. They had the backing of Equity Bank - which had raised KES 11bn in a very smart deal earlier - and BAAM.

I expect HFCK to post solid numbers in 3Q 2008 vs prior quarters. The 'extra' cash can be placed with various banks who are 'short' on cash. Also this sets the stage for a rapid expansion for HFCK into developments for low to medium income earners.

KCB raised KES 5.0bn but the current price has fallen below the Rights price.

I expect the price to recover based on its strong balance sheet & growth prospects outside of Kenya.

I&M Bank raised KES 600mn from a (private) Bond Issue but also attempted to raise another KES 600mn in Tier 1 equity from private sources. I expect it to have been successful since they have PROPARCO & DEG on their board.

Privately held therefore less information available. PROPARCO & DEG can provide access to funds if needed. Expansion into other market segments (new branch in Ongata Rongai) from its traditional 'upper market bank' image. Relies heavily on corporate customers BUT faces increased competition from Diamond Trust Bank & NIC Bank. An interesting addition for I&M Bank is the purchase of 50% of a Mauritian bank.

Co-op Bank wants to raise capital through a New Issue of shares. I expect they will be successful in spite of all the doom & gloom.

I think they will expand their footprint but will they be held back by their co-operative roots? Can they attract additional business from corporates? All said & done, I think the 'increased' privatization of firms that are farmer-owned will benefit Co-op Bank.

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