The Central Bank of Kenya (CBK) has levied bank fines against five institutions over transactions relating to their handling of payments and movement of funds sent from the scandal-plagued National Youth Service (NYS).
The banks are Diamond Trust which handled Kshs 162 million, and was fined Kshs 56 million, Co-operative Bank which handled 263 million (and was fined 20 million), KCB which handled Kshs 639 million (fined 149.5 million), Equity moves Kshs 886 million (89.5 million fine) and Standard Chartered which handled Kshs 1.63 billion from the NYS, and which was fined Kshs 77.5 million.
The CBK statement read that the bank fines followed investigations into failures at the banks including; not reporting large cash transactions, not doing due diligence on customers, lack of support documents for large transactions and lapses in reporting suspicious financial transactions to the Financial Reporting Centre (FRC).
Notably missing was Family Bank that featured heavily in a prominent series of transactions of funds that originated from procurements at the NYS. It has been previously sanctioned and branch and senior staff are being prosecuted.
All the banks which handled NYS funds had been named earlier and the CBK statement added that this was not the end, with an additional group of banks set to be identified and investigated.
This week the deal for Diamond Trust Bank to acquire Habib Bank was approved by regulatory authorities. The Central Bank of Kenya approval notes that Habib will acquire 4.18% of Diamond Trust (the 6th largest bank in the country) and that the transaction would be completed on August 1, 2017, when Habib Bank (the 33rd largest) will cease being a licensed bank, and all its depositors, borrowers, employees, and creditors will be transferred to Diamond Trust.
As is the norm these days for large M&A deals to be approved in Kenya and the COMESA trade zone of Africa, there is a focus on job retention for as many of employees, and that there be no layoffs, while some business will continue with existing partners in terms of sales, distribution, servicing, and licenses for a defined period of time after the deal.
The Competition Authority (CAK) has approved the Diamond Trust Habib deal “on condition that the acquirer, Diamond Trust Bank Kenya retains at least 41 employees of Habib Bank post transaction.” This is also seen in other recent deals approved by the Competition Authority:
Distell Holdings which became the majority owner of Kenya Wine Agencies Holdings East Africa earlier this year was required to “retain the 42 employees at the production unit of KWAL for at least three years,”
For the Coca Cola Beverages Africa purchase of Equator Bottlers (at Kisumu through Kretose Investment) “the merged entity retains at least 2,279 employees post transaction”
And approval of the acquisition of 57.7% of General Motors East Africa by Isuzu Motors has a “condition that the merged entity will absorb all of the 383 General Motors East Africa employees.”
Also, earlier, CAK, ordered listed banker I&M Holdings to retain 108 employees of Giro Commercial Bank, as a pre-condition for approval of the takeover.
An unexpected piece of news today was the announcement that Diamond Trust intends to acquire Habib Bank. Diamond Trust is Kenya’s sixth largest bank with assets of Kshs 230 billion (September 2016), while Habib is number 34 with assets of Kshs 11 billion. The banks have a common shareholding though the Aga Khan network. EDIT: the purchase will be done by the issuance of 13.28 million shares of Diamond Trust at Kshs 137.39, valuing the deal at Kshs 1.82 billion. Other shareholders of Diamond Trust will be diluted by 4.75%.
A week earlier, the Central Bank of Kenya also announced that it was in the process of licensing two new banks – DIB and Mayfair. DIB Kenya is a wholly owned subsidiary of Dubai Islamic Bank, a leading sharia compliant bank from the United Arab Emirates. DIB is not associated, and won’t want to be linked to the Dubai Bank that’s currently in liquidation. Mayfair Bank is owned by a diverse group of Kenyan investors with interests in various sectors (including politics)
Also, a decision on Chase Bank is expected in the next few weeks. A target had been set to restore the bank back to indecent owners by the first anniversary of it being put into receivership. A merger or buyout is likely.
More mergers expected with the credit squeeze on small banks?
From a Diamond Trust newspaper release
Habib is the largest private bank in Pakistan with 1,673 branches in 22 countries. The deal will enable DTB to establish relationships with frontier markets in Asia where Habib has operations and this is also in line with the CBK policy of consolidation in the Kenyan banking sector.
The lead transaction advisor for the deal was Pacifis Advisory, assisted by PWC while Anjarwalla & Khanna was the lead legal advisor.
Kenya Commercial Bank and Diamond Trust Bank will pay depositors of Imperial Bank their deposits, up to Kshs 1 million ($,9800) each. This means that 44,300 or 89% of the banks’ depositors will get their money within a few weeks at branches of KCB or DTB.
This comes as Imperial Bank shareholders have not accepted the government proposal that will allow reopening of the bank.
The support of the (DTB’s largest shareholder) Aga Khan Fund for Economic Development (AKFED) has been instrumental in reaching this agreement.