KCB to decide on Chase Bank buyout in June

KCB expects to complete a due diligence on Chase Bank (in receivership) in slightly over 30 days. The lender, Kenya’s largest commercial bank by assets, will then use its findings to make a decision on whether to acquire a controlling stake in the mid-tier lender or not.

KCB Group Chief Executive Officer Joshua Oigara. [PHOTO: FILE/STANDARD]

KCB Group Chief Executive Officer Joshua Oigara said the lender is in discussions with the receiver Kenya Deposit Insurance Corporation (KDIC) on how to proceed with the comprehensive due diligence.

Oigara said that the due diligence will be done by an independent expert who will look at the legal, financial and credit assessment of the business.

“You know we had one year, but we want to make it shorter. By end of June, we shall have quite a good view of Chase Bank,” he said during an interview at his office in Nairobi.

An independent firm will be selected to do the due diligence, said Oigara. “We do not have anyone in mind right now,” he added. This will be agreed upon by KCB and KDIC.

Good progress

Asked if what they had found out so far would encourage KCB to make a move on Chase Bank, Oigara was non-committal. He, however, said that the decision would depend on the results of the due diligence.

“We would not comment on getting a stake at this stage. Remember we were only appointed as statutory managers of Chase Bank- to re-open the bank, get some services back, to repay some depositors and then conduct a due diligence which should then be a basis for us to say what is the next step,” he said.

He said they had made some little good progress within the 30 days they have been at Chase Bank as managers.

In that period, 300 new accounts were opened and Sh1.5 billion deposits made as customers expressed confidence in a bank that some had pronounced dead after it went into receivership. “There is some good stuff happening. All the avenues-branches, the agents, ATM, loan collections and payments are up now,” he said noting that only the credit cards and lending were not yet up.

He said of the Sh5 billion facility which they thought they would pay depositors, they have paid “below Sh3 billion.”

Last month, KCB was chosen to help salvage Chase Bank which had been put under receivership following cash-flow issues.

Oigara said they had since confirmed that the problem at Chase Bank was a lapse in corporate governance just as Central Bank of Kenya (CBK) had pronounced. “We are confirming what Central Bank has said that there were gaps in governance, gaps on oversight of the bank. There were questions about the lending decisions that the bank had made,” he said.

KCB had the option of acquiring a majority stake in Chase Bank but subject to the results of due diligence.

Chase Bank was placed under receivership in April following revelations that senior bank officials had lent themselves and their business entities a total of Sh16.6 billion and the bank had a further Sh8.7 billion in bad debts.

CBK announced that KCB was chosen to help revive Chase partly because it was Kenya’s largest lender, and the fact that it beat eight other suitors who also presented bailout plans. 

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