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Fund managers take hit from collapse of Chase, Imperial Banks

By Otiato Guguyu | Published Sat, July 14th 2018 at 00:00, Updated July 13th 2018 at 23:13 GMT +3
A section of Nairobi Securities Exchange trading floor. Sour bonds have hurt some market players. [David Njaaga, Standard]

In summary

  • Private papers issued by ARM Cement and Nakumatt posed a further risk
  • CMA said some key investment managers lost Sh4.2 billion last year over the suspension of Chase Bank, Imperial Bank bonds

 

With Athi River Mining having defaulted on interest payment on a privately placed bond it issued in 2015, fund managers are looking at heightened losses.

The Capital Markets Authority says some of the key investment managers lost Sh4.2 billion last year alone over the suspension of Chase Bank, Imperial Bank bonds and poor operating environment.

The markets regulator warned that private papers issued by ARM Cement and Nakumatt posed a further risk in the heightened challenges facing the two firms.

“There was a marked loss in momentum in 2017, attributable largely to prolonged political uncertainty in Kenya, on the back of challenges of heavy investment by fund managers on Chase Bank and Imperial Bank bond offerings and their subsequent lock-in following their placement under statutory management,” CMA said in its recently released study.

“Further, commercial papers issued by Nakumatt and Athi River Mining Cement Company both of whom have faced challenging financial times in the recent past was another asset classes adversely affected,” CMA said.

South African firm Real People, which raised Sh1.6 billion bond, has also been flagged for possible default by South African firm Global Credit Ratings.

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Just last month, Moody’s withdrew its ratings on the issuer heightening anxiety on the bond.

“Moody’s Investors Service has today withdrawn Real People Investment Holdings Limited’s Ca/Not Prime global scale issuer ratings and the Ca.za/NP.za national scale issuer ratings for its own business reasons,” Moody’s said last month.

Equity Investment Bank Money Market Fund lost the most amount of money at Sh1.7 billion after assets fell from Sh2.9 billion to Sh1.7 billion.

But profit increased

Britam Investments funds under management fell from Sh9.3 billion to Sh8 billion, a 14.5 per cent drop making it the second most hit in terms of amounts.

Ghengis Capital, which was affiliated to Chase Bank at the time of the lender’s collapse, booked a 22 per cent drop in assets which fell from Sh700 million to Sh545 million.

Genghis Capital and Boulevard Properties Ltd — a Genghis subsidiary had common shareholding with Chase Bank prior to its receivership.

Madison was down 10 per cent to Sh794 million and Amana Capital dropped by 6.1 per cent to Sh1.9 billion.

CMA, however, says that on the other hand, the net profit of the funds increased from Sh1.3 billion in 2016 to Sh3 billion in 2017, representing a 120 per cent increase.

Funds under management increased from Sh41.6 billion to Sh44.6 billion with Commercial Bank of Africa, CIC Insurance and Sanlam making gains in market share.

In 2017, only two firms, Genghis and Stanlib, made losses of Sh144 million and Sh409 million, respectively.

Net assets of the funds have also been on the rise with an average growth level of 52.3 per cent in 2017 from 2016.  

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