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Archive for the ‘Banking’ Category

Football and Banking: The Africa Cup of Nations Edition

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It is not every day that you see local banks sponsoring big sporting tournaments- In Africa the major players in the market are mobile phone operators and beer companies. Standard Bank Group, as it is known in South Africa and trading as Stanbic Bank in other African countries, decided to sponsor a few its select clients to go to Luanda and watch the Africa Cup of Nations quarterfinal match between the host Angola against Ghana. 

Before the actual football, however, the clients got a chance to be treated like royalties at every leg of the journey. They got a chance to mingle with people from across the continent- Botswanans, Kenyans, Ugandans and a Ghanaian guy who’ll always be remembered for his naughty son. On the day that the special guests arrived in Luanda, they enjoyed a magical evening at Cafe Del Mar, a Slipway type space,  that included watching the sunset on the horizon before being ushered to dinner at a nearby restaurant where a live band played soft and soothing music in the background. The next day they visited Musullo Island where they were served a great selection of fresh sea food and other delicacies before the long trip to the November 11 stadium to watch the match. The bank was able to reserve a special section for them, with a private snack bar and the likes.   

All in all, it was a great PR move for Standard Bank- all those present are likely to dish out accolades and compliments to the bank in their respective countries. For an ordinary client to receive such a star treatment that they only see in movies is an extraordinary occurrence and their stories are more than likely to encourage others to join the bank in the hope that next time it will be their turn. The bank did not simply offer tickets to a football match but provided its clients with an experience, one that left them with a little bit of Angola and newly forged friendships. This is certainly a unique way to attract clients and enjoy the beautiful game. One that will certainly change how customers in the continent view Stanbic. 

Written by serengetiadvisersblog

February 8, 2010 at 16:45

CRDB Goes Digital

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Here is an interesting development:

CRDB Bank centralized country-wide business operations in Dar-es-Salaam with the twin-objective of enhancing branch services and reducing operational costs. Intellect Business Process Studio (BPS) was chosen to enable this transformation.

Intellect BPS enabled the centralization of account opening and services, check processing, automated RTGS (TISS) and cross-border fund transfers. With the processes automated at the back-office, the front office staff can focus on building a rich branch banking experience. The system was implemented in 16 weeks using Polaris’ Accelerated Implementation methodology.

Now, latest core banking software should in principle improve a bank’s efficiency. However, the above article does nothing more than simply act as a publicity tool on the side of Polaris, and does not provide any real analysis of current, or expected, performance of CRDB’s core banking activities. 

Shall we expect reduced waiting time on queues? Maybe, may be not. Considering the technology adoption cycle, we should actually expect a temporary deterioration of services due to a steep learning curve and ‘bug fixes’ of any new system. 

In the long run, it boils down to the kind of staff working for CRDB. Any new system, however impressive, that is implemented without a motivated, well trained and customer oriented staff, is unlikely to make a difference. So, was it wise for CRDB to spend millions of bucks on a new system? Yes, if they took all factors into consideration, including investing in what some would say is the most crucial piece in all this: the human element. Remember, new doesn’t always mean better.

Written by serengetiadvisersblog

February 4, 2010 at 19:37

Annals of Shoddy Journalism

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Regular readers of Serengeti’s Media Report will remember a Yellow Couch piece in the March issue of last year about how some newspapers have the tendency to rely exclusively on anonymous sources in their news stories. As the piece argued at the time, anonymity, with few exceptions, is overused and has become a way for sources to disseminate information and their versions of the truth without being accountable for what they say. Far worse it can turn journalists into active participants in the spread of misleading and at times biased stories. You can read the rest of the Yellow Couch here.

A perfect illustration of this pathology appeared today on the front page of The Guardian. In a stunning piece of spin masquerading as journalism, the paper published a story that quoted ‘experts’ who think that the Bank of Tanzania (BoT) was right to spend Tshs 2.5bn/ to build new residences for it’s top two executives. Here are cited sources as they appear in the article:

‘leading economists and prominent industrialists’, ‘Dar es Salaam-based economic consultant’, ‘a retired banker who…has known incumbent BoT governor…“extremely well for decades”, ‘several prominent businesspersons dealing in import and export trade’, ‘a prominent business analyst’, ‘a BoT inside source’, ‘ a senior official of the central bank’, ‘a renowned political scientist’.

None of these sources are named nor is it explained to readers how they came to be ‘leading’, ‘prominent’, or ‘renowned’. Not a single sentence in the whole piece quoted an alternate perspective, allowing the opinions of these ‘leading’, ‘prominent’ and ‘renowned’ shadowy figures to enter the public sphere unchallenged. Furthermore, because of their anonymity readers are unable to ascertain the sources’ motives and why they decided to hide their identities. On top of that the story itself is not bylined. Readers have to contend themselves with the vague, ‘By Guardian Team’ (This in itself should be interrogated. Who makes up this Guardian team, especially since, according to news reports, most of the ‘junior reporters’ working for The Guardian Newspapers Ltd. are on suspension?) below the headline, ‘Experts:why furore over BoT chief’s residence?’

This is not journalism. It is propaganda. It is shameful and it should stop.

UPDATE: In its editorial today, The Guardian continues to push the spin advanced by the anonymous sources in the above story. Regurgitating almost verbatim the arguments put forward by its ‘leading’, ‘prominent’,  and ‘renowned’ sources, the paper has essentially become a parrot for their views. This is propaganda journalism at its most shameless. The intriguing question is, why is The Guardian engaging in such biased and shallow reporting in defense of this BoT decision?

UPDATE II: If you are curious on the subject of anonymous sources and how they should be used in journalism take a look at these guidelines from The New York Times and The Washington Post.

Written by serengetiadvisersblog

January 19, 2010 at 17:42

Watching CRDB: an analysis of the effects of the financial crisis

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The leading story on the global economic crisis in The Citizen newspaper on May 6th, 2009 is important for two reasons.

First, it attempted to put some real numbers on the impact of the global economic crisis on Tanzania’s banking system. The East African Central Bank Governors concluded a meeting in Kigali, Rwanda on May 12th. In their joint statement, they: 

‘confirmed that the EAC economies did not experience severe first round effects of the global financial crisis. They however observed that the EAC Partner States are not immune to global events in general, as their economies are currently suffering from second and third round effects, notably decline in export demand, slowdown in FDI and remittances, and decline in foreign aid to government.’

First-round effects refer to the huge, negative impact on the health of global banks of the devastating drop in the value of the financial securities (the ‘toxic’ assets based on sub-prime loans) which initiated the global economic crisis in the first place. Since Tanzania’s banks did not have any such toxic assets, they did not suffer such losses.

But as the global banks panicked and stopped lending, international credit dried up, followed by the demand for exports which is financed by this credit. The result was a huge 20-30% drop in export sales for all of the major sectors and companies, huge job losses across economies, and the evaporation of consumer spending which drives the global economic engine. These are the second- (export demand), third- (drop in foreign investment and remittances) and fourth- (decline in foreign aid) round effects which are beginning to show up in Tanzania’s economy, via the banking system.

Consider the second-round effects. When export demand falls – due to a combination of fewer buyers with cash and much lower prices – Tanzania’s commodity exporters (cotton, fish, tea, flowers, horticulture), who borrowed from the CRDB and others in mid-2008, find it difficult to raise the cash to repay the loans. Borrowers’ problems pose the most direct risk to Tanzania’s banks and its banking system. The severity will depend on how big these potentially problematic loans are relative to the whole banking system.

That is why The Citizen’s analysis of CRDB’s position is so instructive and is the second reason for the story’s importance.

In December 2008, CRDB was Tanzania’s largest lending bank (TZS 836 billion in loans) and second largest bank by assets (TZS 1.5 trillion) and deposits (TZS 1.27 trillion). So, due its sheer size, CRDB is as good a bellwether of the health of Tanzania’s banking system as you can get. If it has a large number of problem loans, other large lenders may have similar troubles. Also if it holds a large amount of other banks’ cash as inter-bank deposits its ability to return that cash is crucial. Any doubt about CRDB’s financial strength may worry depositors and cause them to withdraw their funds, leading to a devastating, and sometimes contagious, bank run.

A closer look at CRDB’s financial position reveals a less alarming picture. First, it had a very small TZS 3.35 billion of other banks’ money in December 2008, so it has no problem repaying them. Second, its total loan book of TZS 848 billion was just two-thirds of its customer deposits. Indeed in 2008, the growth in loans of TZS 248 billion was just short of the growth in deposits of TZS 259 billion. This combined with its cash pile of TZS 295 billion suggests that CRDB is very unlikely to run into any cash crunch problems anytime soon.

Finally, the TZS 168 billion reported as problem loans to crop buyers amounts to almost 20% of the bank’s loan book. If it was to all go bad simultaneously, a highly improbable event, CRDB’s profits would evaporate and the bank remain in the red for at least the next three years. However like any prudent bank, CRDB is secured, in part by the crops which it financed. As the price of the commodity rises (cotton is up by 10% in April 2009 alone, tea prices are up 15% since November, Arabica coffee is up 12%, but Robusta is down 18%) so too does the value of the bank’s collateral and the borrowers’ ability to sell and repay the loans. It may take longer than normal to fully repay the crop loans, but as things stand, CRDB’s financial strength can probably outlast the economic downturn.

However, there is a sting in the tail of The Citizen’s scrutiny, and this concerns the timing of its publication. The first article appeared just two days before the last day of its initial public offer (IPO) period. This may have affected investors’ appetite for the CRDB share offer. Bad news during one’s IPO cannot be good for investor sentiment.

A value-driven investor looking to buy CRDB shares will have had to consider the implications of the problematic loans on the value of the shares she wants to buy. The shares’ fundamental value will be determined by CRDB’s profit performance in 2009. If the crop loans do sour, profits will be negatively affected by provisions which will in turn have a negative impact on the bank’s earnings per share. But this will not be known until later in 2009 or even early 2010 when CRDB reports its full year results.

The speculative investor is more concerned about price than value because he wants to profit from a rise in CRDB’s share price when it starts trading on June 17. His biggest worry is that the article may have discouraged potential buyers of his shares when trading begins. Recent experience may calm his fears about investor appetite for bank shares.

In September 2008, investors spent almost TZS 100 billion chasing after just TZS 63 billion of NMB shares. A few months earlier, the Dar es Salaam Community Bank found itself attracting TZS 5.2 billion for a small TZS 1.5 billion share issue. In this instance, Danida Investment Fund asked for a very modest TZS 18.8 billion for a five percent share of CRDB. Can one newspaper article stem the flood of cash that is likely to be attracted by one of Tanzania’s banking giants? We shall know on June 3rd when the results of the IPO are announced.

Written by serengetiadvisersblog

May 19, 2009 at 17:11