The boards of NIC Group and Commercial Bank of Africa have announced preliminary plans to merge. This follows talks that had been reported as far back as January 2015.
The move is driven by a need to consolidate capital and liquidity with new technology opportunities to provide more services to customers and grow returns for shareholders.
The merger of the eight and ninth largest banks in the country will result in a banking institution that will be the second or third largest by assets, behind KCB and Equity. As of September 2018, NIC and CBA had a combined asset base of Kshs 443 billion ($4.3 billion) and Kshs 9.3 billion in pre-tax profits.
CBA is already the largest bank by customer numbers thanks to M-Shwari, its partnership with Safaricom’s M-Pesa that had over 21 million customers last year.
More details will come later and NIC is listed on the Nairobi Securities Exchange.
Today the Receiver Manager of Imperial Bank, the Kenya Deposit Insurance Corporation and the Central Bank of Kenya issued a notice of, and a timeline for, the recovery of Imperial Bank.
This is a suprising about-turn from the perception for much of period since Imperial Bank was suddenly closed in October 2015, in which there appears to have been a leaning by the receiver-manager that Imperial was beyond recovery and that it should be liquidated. Today’s notice comes exactly a year after NIC Bank was appointed to liquidate Imperial bank assets and pay off Imperial’s depositors.
Now, the envisioned recovery process is similar to one being used for Chase Bank which is open, but still in receivership. Expressions of interest are invited from strategic investors. They will be evaluated and the short-listed ones will be given further confidential data to enable them to do due diligence and come up with formal offers that they will present to the to the receiver-manager to decide on. The process will take about a year.
This is a nice sign, but is it one that should have happened earlier? In the same period the fate of other troubled banks in the region has been concluded – in Uganda (Crane and Imperial) and in Rwanda (Crane, which was bought by Kenya’s CBA last week from DFCU of Uganda.
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.
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.
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.