Business Daily (Nairobi)
Washington Gikunju
3 March 2008
Investments and Mortgages (I&M) Bank has joined a growing list of local companies that have expanded their operations outside the country after buying out a 50 per cent stake in First City Bank (FCB) of Mauritius.
The $15.5 million (Sh1 billion) deal was concluded last week and makes I&M a joint shareholder with CIEL Group, a Mauritius based industrial conglomerate.
I&M has capitalised on its internal operational efficiency to become one of Kenya's top 10 most profitable banks in a crowded field of about 45 players, barely three decades after it was founded in 1980.
The bank's total assets base stands at Sh30 billion with a geographical presence in Nairobi, Mombasa and Kisumu. Despite having a relatively thin network of only about 10 branches, I&M managed to grind out a pre-tax profit of Sh936 million in 2006 and expects to breach the Sh1 billion profitability mark when it announces its full year results for 2007 at the end of this month. Un-audited financial statements for the nine months to September last year show that the bank is well on course to achieving this feat, having recorded earnings before tax of Sh895 million by then.
Chief executive officer Arun Mathur says the Mauritian acquisition was a product of prudent management foresight mixed with a stroke of good luck as the opportunity arose just months after the bank had embarked on building an expansion war chest.
In October last year I&M added to its shareholding roll DEG Group of Germany and Proparco of France, with the two leading European development finance institutions injecting Sh377 million into the bank.
The privately owned bank had also raised Sh240 million from its shareholders in 2006 by way of a rights issue which, with its total shareholders' equity standing at Sh3.2 billion as per September last year's figures.
Mr Mathur however says that despite having expansion plans that require massive funding I&M shareholders are still not ready to let go of their investment and plans to publicly list the bank are still in the distant future.
The CEO is excited that the bank has acquired a foothold in Mauritius which is considered a financial hub with a vibrant banking industry.
"Mauritius is an international banking centre with a stable political environment and has experienced sustained economic growth for almost three decades," says Mr Mathur.
The immediate plan is to turn around the fortunes of the former state owned loss making bank by growing its business and embarking on a restructuring process expected to cost $6 million.
FCB has a total clientele base of 55,000 and 14 branches located all over the Mauritian Island which has 19 licensed commercial banks.
Mr Mathur says the new management will exploit Mauritia's friendly investment policies to develop offshore banking as a key plank of FCB's business.
The Mauritian policies designed to attract foreign investors include offering automatic residence to any investors who purchase property worth over $750,000. I&M is also banking on joint shareholder CIEL Group's knowledge of the local business environment as it seeks to come up with a restructuring strategy.
CIEL Group has interests in the sugar industry, power generation, ready made garmets, property development and funds management in Mauritius and beyond.
The Indian Ocean Island is a popular tourist hub with a population of about 1.3 million that speaks both English and French languages.
Its agro-based economy has been growing at an average rate of about seven per cent since the 1980s on the back of a stable political environment making it a favourite foreign investment destination.
Mr Mathur says the next stop could be Tanzania which is currently recording growth rates of about 7 per cent, and in which its investment partner, CIEL, already has a foothold.
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