StanChart shuts down corporate advisory unit

Caroline Armstrong-Ogwapit and Wanjiku Mugane who have been voted into the Kenya Airways board of directors. PHOTO | COURTESY
Caroline Armstrong-Ogwapit and Wanjiku Mugane, who have been voted into the Kenya Airways board of directors. PHOTO | COURTESY  WANJIKU MUGANE

Standard Chartered Bank has shut down its Nairobi corporate advisory unit in changes that led to the exit of division’s head and founder Wanjiku Mugane.

The bank said Friday that financial advisory work including equity capital raising, business disposal and joint ventures coming from East Africa will now be covered from Johannesburg.

Sources close to the matter reckon that the Nairobi unit was closed because it was struggling to get advisory deals in a market dominated by firms like Standard Investment Bank, Dyer & Blair and Faida Securities.

The deal making unit was established in 2006 after Standard Chartered PLC—which owns 73.89 per cent of the Kenyan lender—acquired a 25 per cent stake of First Africa Group, which was co-founded and led by Ms Mugane.

The UK-based multinational acquired First Africa fully in 2009 and renamed it Standard Chartered Securities that has been led by Ms Mugane, 49, since the initial deal seven years ago.


“The Group’s corporate advisory has been consolidated into Corporate Finance Africa to be covered out of Johannesburg,” Richard Etemesi, the CEO of Standard Chartered Kenya said in an e-mail response to the Business Daily.

He added that the restructuring was caused by the need to “maximize on economies of scale and provide centres of excellence.”

This led the Capital Market Authority (CMA) on October 18 to announce that it had revoked the licence of Standard Chartered Securities together with those of Jubilee Financial Services and Ivesteq Capital. Before its purchase by Standard Chartered Bank, First Africa Capital was said to have brokered deals worth Sh120 billion across the continent.

Apart from Nairobi, it had offices in Johannesburg and London and became one of the key dealmakers across the continent with a focus on arranging debts and offering guidance on mergers and acquisitions.

This is what prompted Standard Chartered Bank PLC to acquire the firm in its bid to adopt the financial supermarket status, which included arranging corporate deals, selling insurance products, and offering loans.

But in recent years, the unit struggled to win big-ticket deals, save for handling internal works including last year’s Standard Chartered Kenya’s Sh3.2 billion rights issue where it was the lead transaction adviser.

Kenyan banks have struggled in the face of competition from stand-alone investment banks like Standard Investment Bank, Dyer & Blair and Faida Securities in the race for corporate advisory jobs.

This market structure is what forced Equity Bank to close its investment banking division in December 2009, barely two years after starting operation in what was linked to the unit’s failure to clinch deals, leaving 15 workers jobless.

The bank has since re-opened the unit with a new business model, which aims to offer services to its existing clientele rather than compete head-to-head with other investment banks for business.

The financial supermarket model, however, is increasingly taking root in Kenya, with banks leading the way in adopting this strategy for growth. Equity Bank, NIC Bank, Co-operative Bank, and CfC Stanbic are fronting the model.

But Standard Chartered Bank opted to close its Nairobi corporate advisory unit. Ms Mugane confirmed her departure from the bank, but declined to reveal her next move.

She was previously linked with the top job at CMA where she was being considered by many in the investment banking scene as good choice for the position, given her experience in the deal making front, her international exposure on emerging capital markets and independence. CMA is yet to fill its chief executive post since starting the search for a substantive head mid last year.

In 2009, Ms Mugane resigned from the board of East Africa Breweries Ltd (EABL) after Nigerian Seni Adetu replaced Gerald Mahinda as the brewer’s CEO. She also resigned from Equity Bank where she was a director in 2007.