6 January 2018

Kenya: Mauritius Firm SBM Formally Buys Chase Bank

Photo: The East African
Chase Bank, Kenya

Kenya has accepted the offer from Mauritius firm SBM Holdings for collapsed lender Chase Bank.

This is SBM's second acquisition in East Africa after that of Fidelity Bank in May last year.

The offer, which the Central Bank of Kenya (CBK) accepted on January 4, includes the acquisition of certain assets and matched liabilities of Chase Bank (Kenya) Ltd (In Receivership) -- CBLR.

"SBM's binding offer represents a viable proposal for the substantial resolution of Chase Bank, for the benefit of depositors and the strengthening of the Kenyan financial sector. It is expected that the transaction will be concluded upon the execution and operationalisation of the offer," CBK said in a statement.

SBM's offer is similar to the non-binding offer that was discussed with depositors in October last year. This will now lead to the transfer of 75 per cent of the value of deposits currently under moratorium and the transfer of staff and branches of the existing CBLR operations.

"Non-moratorium depositors will continue to have full unrestricted access to their funds," the regulator said in a statement.

Non-moratorium depositors are those who were not affected by the $10,000 upper limit access to stuck deposits.

'Brother keeper's phenomenon'

SBM is a leading financial services group and the second largest company listed on the Stock Exchange of Mauritius, with a growing international presence currently extending to Madagascar, India and Kenya.

SBM has a market capitalisation of approximately $600 million, with the government of Mauritius as a significant shareholder, and total assets in excess of $4 billion.

In October last year, Chase Bank shareholders threatened to move to court to block the impending auction of part of the collapsed lender to SBM Holdings, after they rejected CBK's decision to consider the deal offered by SBM.

"The decision by CBK on how it will treat Chase Bank depositors who move to SBM and those that stay is unconstitutional. Banks are not run on a 'brother keeper's phenomenon' and depositors are depositors and cannot be subjected to partiality," The EastAfrican was told.

"SBM should ensure that it enters the market in a credible manner without being subjected to any form of illegality or discriminatory action that will erode its credibility."

It is understood that at the October meeting between CBK and the depositors, it was proposed that those who move to the new entity and those who stayed be treated differently, which irked some shareholders.

"It is sad that rather than finish what has been a long journey on the right footing, that a callous and illegal action is attempted by the regulator that will derail this deal with SBM. SBM should seek legal opinion on this action as part of its due diligence and demonstrate maturity and integrity as it enters this market," The EastAfrican heard.

'Not the best deal'

It was also said that SBM had negotiated a deal in which it pays $1 and matches liabilities and assets in a 1:1 ratio. It had not paid any value for the goodwill including the fact that the depositors cash earn the new bank interest on day 1 from the loans that move over.

"Essentially, SBM is not giving the best deal to the depositors and this is because CBK has been unable to negotiate a better deal. They should have allowed the stakeholders including depositors association to participate in the negotiations. The deal also discriminates against depositors and that will be the Achilles heel on this transaction. CBK must ensure that all depositors are treated equally in the transfer of deposits to SBM," one of the shareholders' representatives protested.

In an earlier interview with The EastAfrican, SBM Holdings said it was seeking to acquire more Kenyan banks to boost its balance sheet and realise its ambitious plan of transforming into a Tier 1 bank in three years.

Its Kenyan subsidiary -- SBM Kenya -- currently has assets valued at $70 million and deposits totalling $50 million. It has a branch network of 10 -- six in Nairobi and four in Mombasa.

The lender's lead executive and advisor to the SBM Group Moses Harding said the bank was seeking to acquire the assets and liabilities of other banks to boost its portfolio.

"We are interested in building our portfolio and are ready to look at the assets and liabilities of any bank as long as we feel they are good for us. When we ventured into Kenya, our aim was to get a banking licence. Now we have a foot in the soil and can seek bigger things," said Mr Harding.

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