Category Archives: Imperial Bank

Relief for Imperial Bank Depositors – Part III

This week, depositors at the closed Imperial Bank got some welcome news with the announcement that a third payment was going to be paid to them.

This comes after a first payment last December of up to Kshs 1 million per depositor that was paid through KCB and Diamond Trust banks and another one earlier this year of up to Kshs 1.5 million that was paid out by NIC bank.

This third payment is unique in that it targets the remains depositors many of who are believed to be large depositors.  After the first payment, the CBK had expressed concern that some  depositors had not bothered to claim the funds offered. But assuming that someone has funds of ~Kshs 50 million to Kshs 100 million at the bank, they were unlikely to be elated to received 1 million in the first or second rounds.

This time depositors can access up to 10% of the deposits, so the people above would get Kshs 5 or 10 million – still small, but much better- and depositors have a month to file claims at any NIC bank branches to receive the payments  (deadline 31 Jan 2017).

The news also comes after a few days after newspaper stories that revealed the names and evidence of correspondence of CBK officials  who may have benefited inappropriately from the largesse of the management of the bank that they were supposed to have supervises.

$1= Kshs 102

 

Biggest Banking Stories of 2016

Some are carry-overs from 2015, but still having an impact on the banking sector in 2016 include:

1. The shutdown of Chase Bank in April 2016 came after a 24-hour period that started with a second set of 2014 financial accounts published in unclear circumstances in a newspaper, with different figures. Whether this was due to a reclassification of Shariah loans or (insider) director lending was never explained, but it accelerated an ongoing run of withdrawals and the Central Bank had to close the bank the next day. While it reopened a few weeks later with funding from the central bank (channeled through KCB), and depositors have been able to access some of their funds, the bank is not back to its full standing (it’s till not lending in full, and there’s a moratorium on depositors interest) and  new investors are being sought to enable the bank to stand on its own from April 2017.

2 Njomo Bill: In a rare bi-partisan move, usually reserved for their own salary raises, members of parliament rallied around to take on an even less popular target – that of super profit making, high-interest rate, banks with the Njomo bill. This was the latest attempt to rein in interest rates and the president surprisingly signed the bill, passing on a hot potato which was expected to lead to a slowdown in lending and make banks less attractive to investors.

3. Governor Patrick Njoroge at the Central Bank. Widely admired by the public for his no-nonsense enforcement & understanding of rules, supervision, austerity, and honestly to clean up the banking sector, but vilified in some circles for his unreasonable decision-making that has seen three banks close under his watch.

4. Last year Imperial Bank closure was a shock, and in 2016 the extent of the shell is still becoming clear through numerous court documents pitting the receivers, regulators, shareholders, some customers and even the family of the later managing director who engineered the fraud. But all that pained depositors want to know is, where is the money, how much money is there, and when will they get paid?

5. Lax government banking. From not following up whistleblowers on Family, Chase and Imperial, to a reluctance to act on South Sudan leaders. From double payments to government contractors, to county and national governments having dozens of banks accounts for inexplicable reasons. From a parastatal moving to a single signatory and withdrawing all its’ funds to pay a fictitious contract, and the funny banking of NYS money by Josephine Kabura at Family Bank. The anti-fraud / anti-money laundering/ anti-terror rules are  not being observed.

Why Imperial Bank May Not Reopen Part III

There are two or more sides to every story, and there are several at Imperial Bank. This is just one. The Central Bank (CBK) and the Kenya Deposit Insurance Corporation  (KDIC) have accused the shareholders/non-executive directors of the bank of being negligent in allowing the fraud at the bank estimated at Kshs 34 billion (~$34 million), and collecting dividends from what was a shell institution. The shareholders have fired back in replying affidavits saying they were not party to the fraud and that, among other things:

  • Documents they saw as directors (at board meetings). had been doctored by management of the bank (led by the late group managing director).
  • CBK officials helped doctor the records for many years during their inspection audits.
  • CBK officials received personal favours from Imperial Bank managers.
  • CBK staff and Imperial managers conspired to prevent one shareholder from becoming an executive director of the bank, which would have created a second centre of power (other than the GMD) and which might have uncovered the fraud.
  • The current CBK governor has made unreasonable demands on shareholders and failed to discipline his officers involved with Imperial – even appointing one of them as a receiver manager after Imperial closed.

Meanwhile, a judge issued a ruling that was interpreted differently and a group of depositors went back to court seeking a clarification of what the judge meant. It has been interpreted to mean:

  • Shareholders: The receiver managers (CBK/KDIC) must share information with, and consult, them on decisions affecting the bank.
  • Receiver Manager: Liquidation of the Bank can proceed liquidated.
  • Depositors: Judge said to pay us 40% of our deposits immediately.

Hearings continue next week.

SBM buys Fidelity Bank for $1

Yesterday there was an announcement that the SBM Group of Mauritius would acquire Fidelity Bank for the sum of Kshs 100 (~$1) and inject capital worth Kshs 1.45 billion into the bank afterwards.

This has also been confirmed and welcomed by the Central Bank of Kenya which notes that SBM Group is the second largest company listed on the Stock Exchange of Mauritius. As at September 30, 2016, it had an asset base of about Ksh.417 billion (US$4.2 billion).

The 29th largest bank at the beginning of the year with Kshs 15 billion in assets and a pre tax loss of Kshs 4 million. It had Kshs. 10.4 billion in deposits, and Kshs. 9.6 billion in loans and 14 branches. Fidelity has had a bumpy year as it was briefly linked with legal cases after the shutdown of Imperial Bank. Earlier in the year it announced talks with Duet Capital to invest Kshs 1.9 of capital in the bank as CBK also moved to quash social media rumors that the bank was being placed under receivership. This all now seems in the past with this buyout of the shareholders of the bank at no cost.

$1 = Kshs 101.

Bad Debts in 2016

According to the Central Bank’s Q1 summary,  non–performing loans at commercial banks have increased this year by 15% to Kshs 171 billion in March 2016..Real estate sector recorded the highest increase over the quarter by 42% – attributable to slow uptake of housing units. apartment blockPersonal/household sector registered increases of 21% as a result of negative macroeconomic drivers such as job losses and delayed salaries. The manufacturing sector had an increase of 15% due to slow down in business leading to failure to generate enough cash flows to meet all financial obligations. Transport and communication, agriculture and mining and quarrying economic sectors registered decreases in non-perfomign loans between December 2015 and March 2016. 

Non-performing loans are still only about 6%, but the report also excluded Charterhouse, Chase and Imperial banks.