Category Archives: Imperial Bank

Top Imperial Bank customers to receive 35% of deposits

The Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation (KDIC) announced the conclusion of the Imperial Bank receivership that will probably not satisfy customers who still had vast sums deposited at the bank that was suddenly closed in 2015.

KDIC and CBK announced they had accepted a modified biding offer from KCB, Kenya’s largest bank for Imperial Bank (in receivership) that comes with a payment of 12.7% of the balances that were owed to the remaining depositors.

Since receiving a first payment three years ago through KCB and Diamond Trust banks, of up to Kshs one million ($10,000), that took care of most of the small depositors, further payments have been availed to larger depositors. But with the acceptance of the offer today, they will have only accessed 35% of the deposits they had at Imperial when the bank was placed under receivership, with the balance of their deposits now uncertain. A loan verification process will be done through the first quarter of 2019 after which depositors may be able to receive more of their funds

The collapse of the bank started in the days after the sudden death of its Managing Director, after which revelations of fraudulent accounts he managed, secret off-the-book loans, and fishy undocumented cash transfers came to light. There are some court cases ongoing against the top managers of Imperial Bank. As for bondholder at Imperial, their payment is also uncertain, and the collapse of the bank has had effects on the local corporate bond market.

See also the great series on The Sack of Imperial Bank.

Kenya Banks – Super Profits Back?

The simultaneous release on Thursday morning of half-year results of Kenya’s three largest banks portrays a picture of the banks resuming their super profits streak even as the government looks set to repeal interest rate caps later this year.

But the results are deceptive in that the banks have all shown flat growth in loans, despite the growth in customers deposits which have increasingly been channelled towards funding government debt, at the expense of the private sector.

The results showed:

  • Flat growth in loans: e.g while KCB deposits are up by Kshs 40 billion this year, net loans are actually lower than December 2017. 
  • Decline in assets and capital – as the banks noted that the adjusted capital ratios were due to CBK guidance on IFRS9. 
  • NPA’s up.  
  • Growth in the diaspora and the East Africa region.
  • KCB is expected to complete  the acquisition of Imperial Bank later this year

James Mwangi CEO of Equity spoke of the bank’s total income now being ahead of where they were in June 2016 before the interest rate caps were set by Parliament, and that the June 2018  results were achieved despite losing 40% of loan interest income in Kenya. Interest rate caps which were reintroduced in Kenya in 2016 were pushed at a time when large banks were recording “super profits” and which parliamentarians attributed to them charging high-interest rates to borrowers.

Another factor has been cost efficiency improvements through digitization and a move away from fixed investments in brick and mortar. Equity also reported that 97% of customer transactions were done outside branches and these accounted for 55% of the value of transactions, and their CEO said that in future, branches will be for high-value transactions, advisory services, and cross-selling products.

With the result of the three, along with that of Barclays and Stanbic earlier this month, we have results of five of the seven largest banks in Kenya and none from the smaller banks. Last year,, the top -ten banks took over 90% of the industry profits. What does IFRS9 portend for the smaller banks?

Reading the Nairobi Hospital tea leaves

What does a read of The Nairobi Hospital, which is probably the top hospital in East Africa, tell us about the state of medical investments here? The Nairobi Hospital (NH) was founded in 1954, and it, alongside Aga Khan Hospital,  is where top leaders, politicians from Kenya and the East Africa region are treated. It is also where middle-class Kenyans, tourists, and anyone with private medical insurance is treated or operated on.

Nairobi Hospital room

But treatment at Nairobi Hospital is not cheap; , a few days stay without surgery will cost about Kshs 300,000 (about $3,000) and a night in the intensive care unit (ICU ) is about Kshs 500,000!
Kenyans who have medical conditions have discovered that traveling to India for surgery, medicine, and other complex treatment procedures is a better option, even after one factors in the cost of travel for patient and relatives who oversee the patient.
Anyway, how does the Nairobi Hospital (officially registered as the Kenya Hospital Association) in 2016 compare to a few years earlier with the hospital’s 2009 report?
  • Turnover was Kshs 8.79 billion (~$88 million), up from 8.0 billion in 2015.
  • They had a surplus of Kshs 1.3 billion  ($13 million) up from Kshs 1.06 billion, but below the Kshs 1.4 billion in 2014.
  • Some income items: Pharmacy income was 2.5 billion (a 13% growth on the previous year) and the pharmacy had 60% growth in chemotherapy sales thanks to NHIF package (partnership with NHIF has opened doors to our brothers and sisters who would otherwise have not received world class health services. This has seen a rise in number of patients accessing their preferred health care in our Cancer Center, Renal Unit and Catheterization Laboratory. Laboratory income was Kshs 1.4 billion (they have also implemented o shore reporting from India for CT scan, MRI and mammography). Physiotherapy revenue was Kshs 246 million, and accident and emergency revenue was Kshs 374 million (53% of visits were done in 75 minutes and they plan to reduce the waiting time).
  • Some expense items: The Nairobi Hospital paid salaries of Kshs 2.5 billion (compared to Kshs 2.1 billion in 2015) and they added 276 staff in the year (including 128 nurses), a CEO, Company Secretary, and a Security Manager. Key management compensation dropped from Kshs 130 million to Kshs 93 million (in 2015) – and does that difference correspond to the salary of the outgoing CEO who left to become Kenya’s Cabinet Secretary for Health? They also bought medicine worth Kshs 1.7 billion, paid cleaning costs of Kshs 71M, Oxygen with 41M and paid Kshs 21 million to credit card companies
  • The Nairobi Hospital invested Kshs 2.1 billion in projects such as pharmacy, water storage, parking, nurses accommodation, roads, fencing, and kitchen improvements. They also hired a marketing agency to improve the image and awareness about services at the hospital and participated in news interviews, features, and social media.  
  • Some operational numbers for the hospital: They had 154,760 visits to accident & emergency centre, carried out 685,802 lab tests, handed out 354,296 prescriptions, and did 98,198 radiology procedures. They had 18,386 admissions, had 2,730 births (a 17% decline from the year before), and did 7,990 major operations and 1,975 minor ones. They also an occupancy level of 79%, which was down from 81% on their 299  beds, and they retained their customer satisfaction measure of 89%.  The relocation of their ICU / HDU units temporarily reduced capacity from 356 to 299 beds. 
  • On the finance side, they had cash and equivalents of Kshs 2.7 billion (down from 3.5 billion) but still a very healthy liquidity position. They also had Kshs 399 million at Imperial Bank and had Kshs 280 million of doubtful debts (up from 240 million), and Kshs 24 million in foreign exchange losses from currency fluctuations.  
  • The new Nairobi Hospital CEO wrote that his strategy would revolve around talent, technology, turnaround and territory (new location to enhance service). On the health industry, which contributes 6% to GDP, he wrote that income at the Kenya government’s National Hospital Insurance Fund (NHIF) had more than doubled to Kshs 28.5 billion in 2016 thanks to new rates levied on Kenyan workers and that there were 172,706 health personnel in Kenya in 2016.
 
Website of the Nairobi Hospital.  

Imperial Bank EOI

EDIT – July 24, 2018: The Central Bank of Kenya revealed that KCB was in the lead to acquire Imperial Bank. They submitted a revised bid as another bidder dropped out and CBK and KDIC will continue discussions with KCB about enhancing value for Imperial Bank depositors.

 

Original – September 8 2017 Today the Central Bank of Kenya (CBK) has invited investors (PDF) in an expression of interest (EOI) offer to buy into Imperial Bank, in a move that echoes another ongoing one at Chase Bank.

Imperial, Kenya’s 18th largest bank, was shut in October 2015 following revelations that only emerged after the sudden death the sudden death of Imperial’s group managing director (GMD), Abdulamek Janmohamed, in September 2015.  The bank had assets of Kshs 56 billion and officially had about Kshs 47 billion of depositor funds as at December 2014.

Since the closure, thousands of small depositors have been paid off the but many wealthy depositors  including the elderly, Italians and Asians families and business people still have tens of millions of shillings in deposits there – funds that they had placed for the high returns offered at the previously solid (apparently), fast-growing, business-friendly, and award-winning bank.

It appeared that the bank was headed for liquidation, but for a sudden change of plan and decision to salvage Imperial Bank three months ago. A new timetable was posted and the CBK Governor met depositors of the bank to reassure them of the new process, and they have been keeping track since.

 

The deadline for the EOI is September 29, three weeks away, after which short-listed investors will be invited to see confidential data on the bank. This is despite a long forensic audit and data mining process that was started after the GMD died, some results of which have been cited in court documents and media reports – and which paint a shocking picture about the tenure of Janmohamed and oversight by regulators at the CBK.

Proposals from the short-listed investors are expected in January 2018 for further discussions with a single preferred bidder in February along with other consultations with the shareholders, depositors, and creditors of Imperial Bank.

KPMG has been appointed as a transaction advisor for the Imperial Bank EOI as they also are in the Chase Bank one.

Chase and Imperial Banks receivership updates

The last week of June was quite eventful for Chase and Imperial – two banks in receivership in Kenya.

First, former Chase Bank Chairman Zafrullah Khan was hauled before a court. He was charged with committing a Kshs 1.7 billion fraud at the bank and was then freed on bond after two nights in jail so he could travel to the US for medical treatment.

Mr Khan had appeared before Senior Principal Magistrate Martha Mutuku where he was charged with conspiring to defraud Chase Bank of nearly Sh1.7 billion besides three counts of stealing…
The court heard that Mr Khan had committed the offence of conspiring to defraud Chase Bank Sh1,683,000,000 by falsely pretending that the money had been disbursed to accounts of Carmelia Investments Limited, Cleopatra Holdings, Golden Azure Limited and Colnbrook Holdings as genuine loan facilities.

There were reports that seven other officials of the bank were being sought, but so far only Khan was charged.

On the same day that Khan was in court, Imperial Bank depositors had a meeting with the Governor of the Central Bank. It was quite a long session, after which they surprisingly endorsed support for the new turnaround plan at Imperial that was revealed last week. The despises of Chase have a had a long receivership period, and many of their large depositors still have not got the bulk of their savings and funds from the bank in the 21 months since the bank closed.