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Predicting Investment Losses

 

No one wants to lose money. However, sometimes investors have to deal with the fact that their investments might drop below cost for certain periods.



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FEATURE  
CFC Stanbic 2010 AGM

SOURCE: bankelele.blogspot.com

The CFC Stanbic Holdings annual general meeting (AGM) for 2010 was held on May 21 at the tented parking at CFC Centre, off Museum Hill, Nairobi. (twitter @Standardbankgrp)

The Managing Director re-capped the year’s performance of the group companies. CFC Stanbic (bank) had a flat profit of 1.9 billion [$25 million], CFC financial services (stockbroker) lost 108 million [-$1.4m], CFC Life (insurance) lost 433 million [-$5.6m] while Heritage (insurance) had a profit of 278 million [$3.6m]. He attributed the performance to impairment of the stock portfolio at the Nairobi stock exchange which declined by 60%, increased operating costs (New IT system, write-off old IT system, opening of new branches, and refurbishing/rebranding of all other branches) overall operating income was up 25% in 2009, but operating costs went up 46%. Finally, he added that the first quarter of 2010 has seen a good performance – with good earnings from forex and government securities, and the NSE rebound has good for their portfolio this year

Hot Button IssuePoor performance of the Group /companies was cause for concern among several shareholders who asked questions citing: 
- High operating expenses of 6 billion
- Item of ‘other expenses ‘ totaling 3.4 billion ($45 million) that were not detailed in the notes
-Ill-feeling, that when they approved the CFC Stanbic merger they were told that the group would have a leaner management structure would lead to cost savings across the group, and this has not happened
- Company used to be generous & give bonuses, but looking at the results, this is not going to happen any time soon!

In reply, the Board referred back to the MD’s earlier statement that had broken down the major cost items as well as the decline in the company’s NSE portfolio that had resulted in their auditors asking that they factor in an impairment provision of about 700 million while the others were the IT costs, advertising/branding branch refurbishment across the group, not just bank business.

Why new borrowing?: a corporate bond of 2.5 billion [$32.5m]was asked about. Notes also show increase loan from IFC of 759 million and new loans from other banks - NIC (200m) and CBA (500m). MD said the bond and loans were to support their mortgage business, which has been one of their better performing lines, and also support their subordinate capital position. . 
(500m)

Banking sector fraud is high even as the group invests in new system and new products like electronic banking, there is a lot of fraud in the sector with customers losing their money to bank insider, and are Kenyan laws keeping up with new fraudsters. MD replied that the new system was safer.

Long-serving Chairman Exits: During director elections, the chairman Charles Njonjo announced that Mike Du Toit (long time Stanbic K MD), Titus Naikuni (MD of Kenya Airways) and himself who were all up for re-election were all stepping down, but added that Du Toit would take up other responsibilities within the group. On his part he thanked shareholders for their support though the years and said he was proud that the company that he, Jeremiah Kiereini (fellow powerful director), and PK Jani had started many years ago had grown into a conglomerate which now had undergone many recent changes and there were many new faces (and more women) who did not know his face, He said Kiereini , who will remain on the board for a few more years, would look after his interests but that he would still be around next year, as a shareholder on the floor, to ask questions of the board. Re-elected directors were Eddy Njoroge (Kengen MD), Fred Ojiambo (Nairobi lawyer), Jane Babsa-Nzibo and Greg Brackenridge who will be the new Bank CEO? 

Bonus at next meeting: an extraordinary general meeting of shareholders will be called later in the year to approve the hiving off of the insurance business (CFC Life and Heritage) into a new company (in a deal with Liberty Holdings & African Liaissons Consultants)that will also be listed on the Nairobi Stock Exchange. Current CFCStanbic shareholders will receive a dividend in specie of 1 share of the new company for every 1 CFC share they currently hold, at no additional cost.

Goodies: - lunch box (flat rice & chicken piece), soda, umbrella (which I lost an hour later)
- scary? annual report was 114 pages long without as ingle picture or CSR fluff page. Shareholders also, after several questions, approved a motion allowing the company to publish account sin the newspapers, have it on their website or e-mail it to shareholders in lieu of having to print and mail one to every shareholder.

SOURCE: bankelele.blogspot.com

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