Category Archives: Imperial Bank

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-perfoming 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.

Liquidity in the Banking Sector

The Central Bank of Kenya has published it’s Q1 economic report with some mentions on the banking banking sector. The report notes that:

  • Some banks in the small and medium peer groups faced liquidity challenges in the quarter ended March 2016 due to spill over effects of placement of Dubai Bank in liquidation and placement of Imperial Bank under receivership in second half of 2015.
  • Liquidity distribution in the interbank remained skewed in favour of large banks with little trading across bank tiers reflecting cautious trading ..The Central Bank however, boosted interbank liquidity through reverse repos to needy banks.
  • Depositors migrated their deposits to selected medium banks and large banks. Most large banks rationed lines of credit affecting mainly banks in small and some medium peer groups.

Bank Mergers & Musical Chairs in 2016

There’s a moratorium on new banks licences, but still a lot happening in the ownership suites.
Who’s In
  • Bank M (of Tanzania) has bought out and rebranded (the former) Oriental Commercial Bank.
  • Sidian Bank: Centum bought out and rebranded (the former) K-Rep bank.
  • Spire Bank: Mwalimu SACCO bought out and rebranded (the former) Equatorial Commercial  bank.
Who’s Hanging On
  • Chase bank now reopened, but yet to resume lending. An ownership decision  is expected soon (process being managed by KCB)
  • Credit bank:  Discussions are ongoing about a sale to  FEP Holdings
  • Imperial bank (assets will be assessed and managed by NIC bank)
Who’s on the Way Out
  • Dubai bank (proceeding into liquidation)
  • Giro bank which has been bought out by I&M bank.
  • edit The CFC brand as CFC Stanbic Bank and CFC Stanbic Holdings (i.e group) becomes Stanbic Bank Kenya and Stanbic Holdings PLC respectively  – this comes about nine years after their merger of CFC and Stanbic banks.

Imperial Bank: The End?

The Central Bank of Kenya (CBK) announced that today that the closed Imperial Bank (IBL), will not reopen. In fact it will be liquidated by NIC Bank, Kenya’s 9th largest bank.

This all started 9 months ago, on 15 September 2015, when the Imperial Bank group managing director (GMD), Abdul  Janmohamed passed away.  The bank directors then discovered fraudulent transactions that the GMD has orchestrated at the bank. They presented their findings to the CBK, who then shut the bank.

While the CBK blames the board and shareholders, the, the shareholders/directors say they were innocent of the wrong-doing perpetrated by the GMD; they had a hands-off role (complying with CBK rules for non-executive directors), and that their external auditors and the Central Bank were lax and should have flagged the 13 year fraud. The shareholders of the bank were optimistic that a strategic investor would buy the bank within 12-18 months of reopening. But it’s not clear if NIC has been selected to do that by the Kenya Deposit Insurance Corporation (KDIC). NIC will also assume the majority of IBL staff and branches, and announcements on the way forward will be made in the near future. 

Imperial Bank logo

  • NIC will pay Kshs 1.5 million to all depositors. Thereafter, it is expected that at some point, NIC will pay any remaining depositors about 40% of their proven deposits (there are individuals and institutions who had tens or hundreds of millions of shillings as deposits) (Last year, KDIC used KCB and Diamond Trust banks to refund Kshs 1 million to each depositor at Imperial Bank)
  • NIC will get access to operate the 26 branches in Kenya. But the 2015 bond information memorandum noted that Imperial owned no property. The Bank owns no Properties. It leases all the premises used for its business operations. In Uganda, the 5 branches there were disposed of in a sale.
  • It’s not clear how many of the 600 employees at Imperial are still around, waiting for jobs
  • The CBK statement notes that a forensic audit is almost complete. This is an exercise that the directors of the bank began after the GMD died to determine the extent of the hole in the bank.
  • Court cases will continue and KDIC will retain other assets of the bank (..cash, collateral, government securities, loans..)
  • If it heads to liquidation, the name Imperial Bank (name) will disappear.

$1 – Kshs 101