Category Archives: Imperial Bank

Reading the Tea Leaves at Imperial Bank

A few days ago Imperial Bank was closed by the Central Bank (CBK). No one officially knows what was going on, except the board of directors and officials at the CBK. 

The day it was closed (actually taken over for 12 months), the bank was to list a Kshs 2 billion ($20M) bond, 15%, 5 year bond that was fully subscribed (actually 101% uptake).

These are excerpts from that 194 page bond information memorandum (IM) document

 The Bond: The bond was to achieve 50% of target to be a success (it ended with 101%). The funds raised were tp go towards loans and buy more government securities. Also in the IM was an assumption that the right issue would raise Kshs 2 billion and that Kshs 500 million would be added to the share capital of the bank.

Bond Interest is to be paid to investors in 2016 (March & September),  2017 (March & September),  2018 (March & September) ,  2019 (March & September)   and  2020  (March & September)  and the principal upon maturity in December 2020.

Strong Numbers: Imperial Bank had Kshs 70 billion in assets as at June 2015, up from Kshs 38 billon in June 2014 – 45% growth in a year. Deposits grew from Kshs 39 to 58 billion and loans from Kshs 30 to 41 billion and Imperial had Kshs 16 billion in government  securities up from 12 billion in June 2014. Off balance sheet liabilities were 9 billion including 7 billion in letters of credit, again a very decent position. At the beginning of the year, they had 11 branches in Nairobi, 10 at the coast, 3 in the rift, 1 in central. in Uganda they had 5.

Imperial is the 17th largest bank in Kenya – a solid tier 2 bank, and had 14th highest profit in the country. Imperial has 590 employees, in group (including 490 at the bank)

 Sudden Death: Imperial Bank announced the death of Mr. Abdulmalek Janmohamed, Group Managing Director and the appointment of Interim Successor on 17 September 2015

Imperial GMD

Imperial Group Managing Director Announcement

Group Managing Director Mr. Abdulmalek Janmohamed is was the Group Managing Director of Imperial Bank and has been with the bank since its inception in 1993. He was instrumental in steering it to a fully-fledged Commercial bank in 1996. With over 26 years’ experience in Banking, Finance and Management, Mr Janmohamed began his banking career as a Management Trainee at Diamond Trust Bank.

He sat on the executive committee, rick committee, credit committee, automation committee , human resource committee and ethics committees. The only board he wasn’t on was the audit committee. He also chaired two management committees – the  Assets & liabilities committee (ALCO) and the executive committee.

Growth Plans: The bank has just opened its 28th branch at the newly reopened Westgate mall Nairobi  with plans to open 3 more new branches before the end of the year. The bank is also on a regional growth trajectory with its current subsidiary in Uganda and plans to open a subsidiary in Tanzania soon.

The group’s internal reporting of business segemental information is shared with the group’s chief operating decision maker. Information reported to the Group’s Chief Executive for the purpose of resource allocation and assessment of segment performance is based on the geographical location of the group 

Auditors: PKF audited the IM document, They have also been auditors for the last 4 years 2010 to 2014  and the IM notes that this was a review carried out in accordance with ISRE 2400 as well as a compilation under ISRS 4410 substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.

Bond placement cost:  Kshs 29 million, with 22 million to the placement agent (Dyer & Blair) , 1.8 million to the accountant (PKF) , 2 million as  legal fees (Hamilton, Harrison & Mathews).

Insider Loans that were disclosed include Kshs 91 million to directors, Kshs 1.2 billion to associates of director and companies they control, and loans of Kshs 476 million to employees – totaling 6% of loans – which are prudential amounts.

Owners as directors: Directors who are shareholders include Alnashir Popat (7%),  Abdulmalek Janmohamed (5%), Anwar Najee (7%), Jinit Shah (2.50%),  Mukesh Kumar Patel (6.25%), Vishnu Dhutia (5.50%) Hanif Mohamed Amirali Somji (5.60%). Other directors include Eric Gitonga Bengi and Omurembe Iyadi (both appointed February 2014)  and Christopher Diaz (appointed February 2015).

Shareholders of Imperial Securities Limited, the holding company of Imperial Bank Limited include Abdumal Investments Limited (14%) East African Motor Industries (11%), Janco Investments (13.5%) Rex Motors Limited (12.5%) Imaran Ltd (14%), Kenblest Limited (12.5%)  Momentum Holdings (12.5%) and Reynolds & Company Limited (10%)

Provisions: From past experience, the management is of the opinion that 1% provision for normal and watch accounts is adequate to cover any accounts which may be non-performing.

Their Customers: Imperial has 52,398 customers , 4,000 of who had more than 100,000 in their accounts.  The bulk of loans are in trade and business services (30%) then financial services and personal/household (13% each) for the group while for the bank it’s 45% trade & business services, personal (19%),  transport (18%), then  real estate and financial (17% each)

Divesting in Uganda: During the year ended 31 December 2014, Imperial Bank (Kenya) sold 36,262 shares in its subsidiary Imperial Bank Uganda to the non-controlling interest, decreasing its shareholding from 63.8% to 58.6%.

Government takes over Imperial Bank

The Central Bank of Kenya has appointed the Kenya Deposit Insurance Corporation (KDIC) to manage Imperial Bank for a year following their awareness of unsafe or unsound business conditions.

Unlike previous banks, liquidity appears to not have been a problem in the decision, and the bank has just raised Kshs 2 billion (~$20 million) via a 5-year, 15% bond that was to list today at the Nairobi Securities Exchange. Imperial Bond

Imperial was Kenya’s 18th largest bank, with assets of almost Kshs 57 billion last year, including deposits of 47 billion, loans of 31 billion and had a pre-tax profit of 2.7 billion ($27 million) in 2014.

Another blog on the intrigues at Imperial notes that the shocking development comes against the backdrop of the death of the bank’s group managing director, Abdulmalek Janmohammed, on September 15, 2015 of a reported heart attack.

EDIT: The KDIC statement notes

  • The Bank was placed under receivership due to, amongst other reasons, irregularities and malpractices in the Bank which exposed depositors, creditors and the banking sector to financial risk. 
  • Normal operations of the Bank are suspended except for collection of loan re-payments or any other payments into the Bank. Debtors are therefore encouraged to continue servicing their obligations.

EDIT: The Central Bank and the Capital Markets Authority released a joint statement

  • The Capital Markets Act, has directed the Nairobi Securities Exchange to suspend the introduction to listing and trading of the Corporate Bond issued by Imperial Bank which closed on September 17, 2015. This suspension has been imposed in the public interest and to protect the interests of investors.
  • The board of directors of Imperial Bank Limited brought to the attention of the CBK inappropriate banking practices that warranted immediate remedial action in order to safeguard the interest of both depositors and creditors.
  • CBK and the board of directors of Imperial Bank Limited are working closely on a feasible resolution mechanism for Imperial Bank Limited (In Receivership). CBK assures members of the public that Kenya’s banking sector remains safe and robust.

Bank Review ’07: Part III

Middle of the pack

20. (20) Fina Bank: Estimated assets of 7.6 billion ($108 million) and profits of 90 million shillings ($1.3 million), with growth of about 20% from a year ago. Opened upcountry branches in Kenya (Nakuru, Mombasa, and Eldoret) and will start branches in Uganda next year, bridging the Fina to their existing Rwanda operations.

19. (22) Family Bank: Estimated assets of 9 billion and profits of 220 million in 2007. Known as Equity Blue, it has enjoyed similarly rapid growth (though slightly less this year) since converting from a building society to a bank. It has followed Equity’s footsteps, applying for the same exemptions granted to Equity – such early as admission to the clearing house and permission to issue chequebooks. It has also opened branches at a fast rate and its paperless banking model and women-entrepreneur loan models are a hit with rural Kenyans. But, in the year in which they converted to a Bank, they also lost their long serving CEO over board dispute and got sued by a Central Bank official who their Chairman had accused of being corrupt.

18. (18) EABS: Estimated assets of 9 billion and profits of 15 million. Teething pains continue at the former building society which converted to a bank three years ago, and had growth of about 5% in 2007.

17. (17) Housing Finance : Estimated assets of 10.5 billion and profit of 120 million, with loans 15% up from a year ago but assets only 2%. The bank tried to merge with Development Bank of Kenya, and later raise cash in a rights issue, but both plans were scuttled by regulators; later the board signed to sell a 25% stake to Equity Bank. HFCK and S&L (owned by KCB) are still major players in the mortgages sector which is becoming a crowded field with newer entrants Stanbic and Standard Chartered. HF also lost a class action lawsuit filed by customers over illegal bank charges.

16. (19) Bank of India: Estimated assets of 11 billion and profit of 500 million for quiet bank that grew at about 25%. Does a lot of India related business and Kenya government securities.

15. (16) Imperial Bank: Estimated assets of 11.5 billion and profits of 600 million. In 2007, the bank grew about 40% as it launched shariah banking, asset finance, children’s accounts and opened new branches at the coast.

14. (14) Bank of Baroda: Estimated assets of 14.9 billion and profit of 600 million for quiet bank that grew at about 25% and does a lot of Kenya government securities investing. It has been in Kenya for 52 years

13. (15) Prime Bank : Estimated assets of 15 billion and profits of 350 million. The fast growing bank will consolidate with affiliate Prime capital company by year end leading to a much larger bank in 2008.

12. (11) Investment & Mortgages: Estimated assets of 30 billion and profits of 1.3 billion. Fast growing bank also diversified into shariah banking, custodial services and also acquired two new euro bank shareholders.

11. (12) Diamond Trust : Estimated assets of 31 billion and profits of 950 million. In 2007 the bank grew about 45% as it opened several new branches, had a second rights issue in less than a year and also acquired a majority stake in Diamond Trust Tanzania.

10. (8) NIC: Estimated assets of 34 billion and profit of 1.1 billion. The bank grew at about 30% in 2007. It had a rights issue, rewarded shareholders with a bonus, went into custodial and investment banking (acquiring a stockbrokerage firm). But the market leader in asset finance also faced increased competition from other banks in this field and was dropped from NSE share index in favour of ICDCI.

9. (5) Citibank Kenya: Estimated assets of 38 billion and profit of 1.9 billion shillings. Otherwise a flat year for the bank whose parent faced her own troubles in the US banking meltdown. Growth was about 5% as the bank got into the local IPO advisory races.

8. (6) Commercial Bank of Africa: Estimated assets of 40 billion and profit of 1.4 billion. Growth of 9% from a year ago got into unit trusts, home loans, insurance, and funding of women projects. Similar to CFC and would be prime candidate for a merger.

7. (7) National Bank of Kenya: Estimated assets of 45 billion ($645 million) and profit of 1.4 billion shillings ($20 million) for 2007. NBK finally had its most of its non- performing portfolio debt albatross sorted out with a government bailout in the form of bonds maturing over the next 10 years. Now that its cleaned up, it could once again be a target of Stanbic again who two years ago offered to buy out NSSF’s 48% after their CFC merger is done in 2008 (Equity Bank is a also long shot). During the year, NBK partnered with Standard investment bank offer stockbroking services through NBK branches and also tried to have businessman Ketan Somaia jailed over an unpaid debt to the bank

Jobs

– Chase Bank; Head of ICT, senior manager operations, head of trade finance. apply by snail mail to the Head of HR 28987-00200 by 29/2
– Cabin crew at Emirates airlines
– Fina Bank Uganda: The bank is starting operation in Uganda in January 2008, and those interested in working there should send detailed CVs to hr@finabank.com.
– tough job – Head of marketing & corporate communications at Kenya Airways apply online by 15/1