14 October 2017

Kenya: Deal on Chase Bank Runs Into Shareholder Wall

Three days before the Central Bank of Kenya made public its receipt of a non-binding offer from Mauritian lender SBM for Chase Bank, governor Patrick Njoroge sought to get the buy-in of stakeholders of the troubled financier.

After presenting details of what SBM Holdings Ltd, already a player in the Kenya banking scene after acquiring Fidelity Bank, Dr Njoroge invited questions from the audience, mainly depositors and shareholders.

It soon emerged that the offer would not be as readily accepted as he had hoped.

At issue was that the take it-or-leave it proposition would effectively allow SBM to cherry pick Chase Bank's most promising accounts, leaving the depositors and shareholders at the mercy of borrowers who have since gone underground.

According to the CBK, SBM would buy only good loans and an equivalent value of deposits from Chase Bank, but not the entire business. If approved, Chase Bank would be effectively liquidated.

CBK told depositors that SBM would take up three-quarters of Chase Bank's $723.87 million asset book or $543 million. More than 180,000 customers who joined the bank after it was placed under receivership would access their $56.2 million.

Another 3,100 large depositors who claim $543 million would be allowed to access a quarter of the funds ($135.72 million) through a current account and leave the remainder in a savings account. The latter amount would earn interest at seven per cent per annum but that its withdrawal would be restricted by SBM.

Half of the deposits, $275.45 million, would be placed as a term deposit earning an interest of seven per cent and only withdrawable over three years in equal tranches.

"The deal will allow depositors to access part of their money off SBM counters from January next year once we conclude this transaction by the end of December this year," Dr Njoroge said.

The proposal has drawn opposition from depositors and shareholders, who term the offer discriminatory and effective liquidation of Chase Bank.

"The decision by CBK on how it will treat Chase Bank depositors who move to SBM and those that stay on in Chase Bank is unconstitutional. Depositors cannot be subjected to partiality. SBM should not be subject to any illegality or discriminatory action that will erode its credibility," depositors told The EastAfrican.

At the depositor briefing, CBK revealed that Chase Bank has a negative equity of $333.3 million, part of which was $190.49 million in bad loans after some borrowers stopped repaying loans.

Imperial Bank

Meanwhile, the CBK has shortlisted three investors to acquire Imperial Bank, which is under receivership after evaluating the expression of interests (EOIs).

The investors should submit their formal proposal for the acquisition of the bank by January 15, 2018.

The investors would be granted access to a comprehensive confidential data after signing a confidentiality agreement to help them develop a formal proposal for the bank.

"The evaluation is now complete and a shortlist of qualifying investors has been identified," CBK said in a joint statement with the Kenya Deposit Insurance Corporation.

CBK shut Imperial Bank on October 13, 2015, citing 'unsafe and unsound' business conditions to transact business at the mid-tier lender which had about Ksh58 billion ($580 million) in deposits.

-Additional reporting by James Anyanzwa

Kenya

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