dave.kim wrote:mwekez@ji wrote:@dave.kim, #KYI - Know Your Investments
HF is a financial intermediary. Notice 2008 it raised KES 2B via a rights issue. 2010 it raised KES 7B via a bond issue. 2012 it has raised KES 3B via bond issue (2nd tranche). HF has also raised funds via other sources. This money is not to be held as cash and cash equivalents but is to be used in the banks core business/operation (lending) in order to generate income.
And that 7B for 2010 was included in the cashflow statement as Operating Cash Flow. Shouldnt it have been reflected in the Cash Flow from Financial activities??Also that is what led to the positive CFO in 2010 report. I was also a keen investor in HF until I realised this.Correct me if am wrong but shouldnt it be a cause of concern if CFO is negative 5 years straight??
Banks do financial intermediation and therefore any money received via bonds/customer deposits/borrowings are considered operating cashflows. (this is unlike non-banks e.g. manufacturing companies).
Check the negative Net cash flows from operating activities and notice they are as a result of the bank having funds that needed to be allocated to operations/core business/lending
2008; KES (739,715,000) – KES 2B raised via right issue in the year needed to applied from this point
2009; KES (265,520,000)
2010; KES 6,118,593,000 – KES 7B raised via bond issue in the year needed to applied from this point
2011; KES (2,812,166,000)
Notice cash and cash equivalents held at the end of the given years meaning the Bank was very liquid and needed to apply the funds in operations/core business/lending
2008; KES 2,772,499,000
2009; KES 2,426,258,000
2010; KES 8,286,656,000
2011; KES 5,108,217,000
Above reflects all is well and nothing should worry. Further, liquidity ratio as in Q3 2012 stood at 30.30% (far above the statutory requirement of 20%)