State revives plan to sell stakes in three lenders after plans to merge delayed

Consolidated Bank along Koinange Street. [Photo by Wilberforce Okwiri/Standard]

The Government has rekindled plans to sell its stake in three struggling lenders after efforts to merge them for more than a decade stalled.

The Privatisation Commission had recommended that Consolidated Bank, National Bank (NBK), and Development Bank be merged.

This was subsequently approved by the Cabinet in December 2008.

Prior to the merger plans, the commission had completed and submitted detailed proposals for the sale of Consolidated Bank and Development Bank to the National Treasury, in line with the Privatisation Act.

The process has, however, dragged since despite the commission’s former boss, Solomon Kitungu, last year giving the strongest indication yet that it was still on course.

However, the commission yesterday said in a notice it wanted to hire an expert to restructure Consolidated Bank, paving the way for the disposal of the State’s stake in the loss-making lender.

The consultant is expected to come up with a restructuring plan for the lender and possibly put it on the market for Sh2.5 billion.

“The transaction adviser is required to prepare a restructuring and options analysis report. The work to be undertaken includes the review of the possibility of implementing a rights issue as part of the privatisation of the bank,” the acting chief executive officer, Jaqueline Muindi, said.

The three banks have a combined core capital of Sh13.17 billion, with the Government owning 50.2 per cent equity through the Deposit Protection Fund in Consolidated Bank and has an 89.3 per cent shareholding in Development Bank of Kenya through the Industrial and Commercial Development Corporation.

Last year, Treasury was reported to be reviewing a proposal to allow Kenya Commercial Bank - the country’s largest bank by assets - to buy NBK, another struggling State-owned lender.

Development Bank, on the other hand, has been banded together with other State corporations by Head of Public Service Joseph Kinyua in a circular issued last month.