The banking sector regulator has accused National Bank of Kenya (NBK) officials of running down the State-owned lender, whittling its value by 80 per cent in three years.
This as two petitioners moved to court seeking to stop the impending takeover of the bank by KCB Group, citing lack of public participation in the deal.
Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge yesterday questioned how the fortunes of NBK, which had been valued at Sh10 billion in 2016, had since plummeted to Sh2 billion.
While answering queries into the bank’s takeover, Dr Njoroge told the National Assembly’s Finance and National Planning Committee reforms at the troubled lender started in 2016.
This was after an audit of its IT system revealed that it had been tampered with, and the numbers reported in its financial reports were not accurate.
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He said the regulator is now working with the office of Director of Public Prosecution (ODPP) to nail those behind the bank’s downfall.
“We have restarted these investigations, and be assured that the heads will roll. We need to clean the bank, and we are working with the investigative agencies to strengthen the case and ensure there is enough evidence,” Dr Njoroge told the committee at Parliament buildings.
He said CBK supports the takeover by KCB Group since NBK’s current management is weak and unable to inspire confidence to attract new capital injection.
“Nobody wants to work with a weak bank, and having seen the management at NBK, strengthening is unlikely. Leadership is key, and the bank needs a team that can turn around this institution. For this to happen, you do not need an economist to run the bank but a banker and less of political appointments,” said the governor.
According to the regulator, NBK has to be saved from going under as it has a -10 per cent capital adequacy ratio.
The House committee chaired by Kipkelion East MP Joseph Limo demanded investigation of the NBK board, including the representatives of the National Social Security Fund (NSSF) and the Government through the National Treasury.
They are the two majority shareholders at the bank with a stake of 48 per cent and 23 per cent respectively.
Meanwhile, Evans Aseto and John Kiptoo, who are contesting NBK’s sale to KCB said considering that Treasury and NSSF hold a major stake in the bank, the process the public should be involved to safeguard their interests.
They also claimed the deal is being conducted clandestinely and are now calling for the courts to hire an independent auditor to value NBK.
Mr Asseto in an affidavit claimed that the anti-trust watchdog Competition Authority of Kenya (CAK) has also not been notified and that the deal may render NBK employees jobless.
“The respondents have branches in close proximity to each other across several towns and cities in Kenya and there is a high likelihood that once the acquisition is complete, the second respondent will have to shut down some branches to optimise efficiency, possibly rendering some of the first respondent’s employees redundant,” he said.
However, according to the law, CAK only prohibits implementation of a merger where parties pay more than 20 per cent of the agreed price.
Contravention attracts a penalty of imprisonment for a term not exceeding five years or a fine not exceeding Sh10 million, or both.
The anti-trust body also set precedence on big bank mergers when it gave the green light to the NIC Bank and CBA deal on the condition that they retain their 1,872 staff working in Kenya for a year.
