We are here to stay says SBM, denies CBK support

An SBM Bank branch in Nairobi. [File, Standard]

Mauritius-based SBM Bank has denied claims that it is being supported by the Central Bank of Kenya (CBK) even as it mulls exiting the Kenyan market.

In a statement, SBM Kenya Chief Executive Moezz Mir insisted that the mid-tier lender did not need the support of CBK as it is liquid.  

“The bank is not under any liquidity support framework from CBK as can be demonstrated by its strong liquidity ratio of 53 per cent,” said Mr Mir.

The 53 per cent liquidity ratio—used to determine a bank's ability to pay its short-term debt obligations—is above the minimum statutory requirement of 20 per cent.

“This confirms our commitment to the market and underpins the long-term strategic plans to continue strengthening the brand both in Kenya and the region,” said Mir, adding that the bank had no plans to exit the Kenyan market.

Last week, the former owners of Fidelity Bank, which was acquired by SBM Holdings, alleged that the Mauritius-based lender planned to exit the country by selling the Kenyan unit, which they claim has been struggling.

But SBM, which entered the Kenyan market by acquiring Fidelity Commercial Bank and Chase Bank in 2017, said it has enough cash to keep going. Much of the liquidity, the lender noted, was underpinned by investment in government securities totalling Sh37.3 billion.

“It is a normal practice for banks to invest excess funds in government securities and liquidate the securities as and when required. The funds that SBM Bank (Kenya) has invested in government securities are, therefore, available for utilisation in other financial needs that the bank may have in future,” said Mr Mir, adding that the fact that government securities are also interest-earning assets means that they are not held as idle funds.

The bank attributed the reduction of liquidity ratio from 61 per cent at the end of December 2021 to 53 per cent in June 2022 to increased lending to customers to drive upwards lending income.

Lending to customers increased from Sh29 billion in December 2021 to Sh33.5 billion in June 2022. The bank noted that the only liabilities to CBK are those that it inherited from Chase Bank and Fidelity Bank. The funds that were advanced by CBK to the two distressed institutions under the liquidity support framework way before the acquisition by SBM Bank (Kenya), Mr Mir noted, included Sh9.7 billion to Chase and Sh2.8 billion to Fidelity.

The former owners of Fidelity have moved to court to block what they claim is an impending sale of SBM Kenya, or be paid Sh2.5 billion they claim to have lost through what they insist was a forced sale of their lender to SBM Holdings for Sh1.

These shareholders insist that SBM Kenya has been struggling, hence the decision by the parent company to exit the Kenyan market. However, SBM said it has a strong financial position with a total asset base of Sh84.3 billion as of June 30, 2022.