The handling of the sale of Imperial Bank might have sucked out most of its value, leaving only a shell that would not fetch a good price.
Coupled with the precedent set by the carving out of Chase Bank’s good books by the State Bank of Mauritius, the offers made seem to have been so low that the Central Bank of Kenya (CBK) has turned down the bidders.
“CBK and KDIC (Kenya Deposits Insurance Corporation) have assessed these proposals and have gone back to the bidders with a view to improving these bids, in order to maximise the value for depositors. We expect to receive the revised proposals shortly,” CBK Governor Patrick Njoroge said on Friday.
“CBK and KDIC reiterate their commitment in keeping with their respective mandates and in accordance with the Laws of Kenya, to protect the interest of depositors, creditors, and the wider public interest,” the regulator added.
Sources indicate that Kenya Commercial Bank (KCB) and Diamond Trust Bank (DTB) are the two bidders who participated in the expression of interest announced in October last year.
Both lenders have an inside view of Imperial Bank, having participated in Kenya Deposit Insurance Corporation payouts to depositors.
Imperial Bank shareholders were offered an opportunity to participate in a parallel process to acquire the lender but are said to have turned down the offer, insisting that they had no access to the true state of the bank. They sued Dr Njoroge and KDIC chief executive officer Mahmoud Mohamed.
“Shareholders moved to court to sue KDIC and CBK bosses in their own personal capacity for mismanagement, and should the said recovery end up in liquidation,” said a source who requested anonymity.
KCB apparently asked for more time to carry out due diligence and revealed that they would need liquidity support from CBK to do the transaction.
The country’s biggest lender has been on the outlook for capital buffers and taking up Imperial Bank would have ramifications on its capital.
Last year, KCB shareholders approved a plan to raise Sh10 billion through a rights issue to boost its capital levels.
DTB, affiliated to The Aga Khan who is in town to mark 60 years since his accession to his role of spiritual leader of Ismailia Muslims, offered a bargain for Imperial Bank.
Having just recently consolidated operations with Habib Bank and sharing Ismailia background with depositors at Imperial Bank, DTB looks best-placed to take over the troubled rival with minimal opposition, according to some analysts.
“They have the credibility to keep depositors from revolting against the carve out. Given the expanded size once the deal is sealed, DTB could announce debt raising to pay out more of the depositors with an exception from CBK as it simply needs restructuring and regulatory blessings,” a debt analyst who spoke on condition of anonymity said.
Word is that DTB proposed to take over part of the loans and deposits. However, the deal will potentially provide depositors with a third of their money over the recovery period.
However, DTB boss Nasim Devji denied the reports, dismissing them as rumours.
“It has become a nightmare for me. It’s not true, all rumours,” she told Weekend Business on Friday.
Compared to the deal at Chase Bank - another lender that was rescued after undergoing liquidity issues - where SBM will make available to the depositors 75 per cent of their savings over time, the offer for Imperial Bank was seen as a raw deal for depositors, forcing KDIC to ask for a better offer on April 4.
“Unlike Chase Bank, Imperial did not have liquidity issues. The bank had Sh20 billion liquidity (cash and Treasury bills) and a Sh40 billion loan book,” said our source.