Coop gets thumbs up for BMathews bid

May 29, 2009
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, NAIROBI, Kenya, May 29 – Cooperative Bank shareholders have approved the acquisition of 12 million shares in the troubled Bob Mathews stockbrokerage firm.

During the bank’s Annual General Meeting on Friday, the shareholders passed the resolution that will see the bank acquire a 60 percent stake in the firm, to be renamed Kingdom Securities at a cost of Sh150 million.

Managing Director Gideon Muriuki said they will now hire new management for the brokerage firm which would be moved to bank’s headquarters at ‘Coop House’.

“We will seek to bring to the brokerage firm the high governance standards in the banking industry. The board will employ a Chief Executive and his senior people out of the well qualified team that we have in the bank to go and run the subsidiary as an operation of the bank,” he said.

A due diligence of the stockbroker is being conducted and once complete, it will be paid for with the proceeds of the bank’s Initial Public Offer (IPO) which raised Sh5.4 billion.

In the bank’s Information Memorandum of the IPO, one of the key areas of investments the funds had been earmarked for, was the strengthening of its investment advisory arm which would help the bank position itself to take advantage of the growth and potential in the area.

“It is also in line with the bank’s model of providing a financial supermarket particularly to the over seven million members of the cooperative movement,” he boasted of the structure where they also have a fund management company, Coop Trust Investment which has a Sh17 billion portfolio.

Explaining to the shareholders what informed their decision to buy into the firm whose license had earlier been suspended by the Capital Markets Authority, Mr Muriuki said Bob Mathews’ financial strength had not been as badly affected as other brokers.

Despite having a cash crunch of Sh2.3 million, he explained that Bob Mathews had the prospects of being the alternative broker that would safeguard the investments made by the cooperative movement.

“The preferred route for us would have been to get our own new license (to operate a brokerage firm) but that was not possible because the NSE (Nairobi Stock Exchange) is a private club and so that option was not available,” he further emphasised but assured them that their investments would still be safe.
 
In this arrangement, customers have the guarantee that should they lose money through Kingdom Securities, the bank would cover the loss.

Mr Muriuki said all their branches would be used as agents for Kingdom Securities and expressed optimism that this would enhance their returns.

Fees such as the Sh50 million that used to be paid by the bank to other brokerage firms every year would now be retained in the institution to enhance shareholder value.

“We will leverage the extensive network of the bank and the Sacco movement’s captive market, to tap the enormous potential to grow our capital base and diversify and grow revenue streams,” he said.

At the same time, the shareholders also approved Coop Bank’s plans to establish their footprint in the region starting with Southern Sudan and Uganda.

They hope to be in Southern Sudan before the end of this year where they are looking at entering into a joint venture with the Sudanese authorities.

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