Kenya Commercial Bank (KCB) is said to be in pole position to buy the troubled lender whose most valuable asset is its control of the small and medium-sized enterprises (SMEs) market where growth has been strong and returns big.
The Central Bank of Kenya (CBK) Sunday evening moved to calm nerves in the troubled banking sector with the announcement that it was opening a special window to support small banks in distress because of a confidence crisis arising from last week’s sudden closure of Chase Bank.
KCB takes pole position in battle to acquire troubled Chase Bank
Central Bank of Kenya (CBK) governor Patrick Njoroge made the announcement at a Press conference and promised that the facility would be available from 11 a.m Monday.
“From tomorrow, Monday at 11 am, we will avail a facility to any bank or microfinance institution that comes under liquidity pressure arising from no fault of their own,” Dr Njoroge said.
The CBK is offering the facility as a lender of last resort to cash starved institutions at the risk of distress from loss of confidence in small banks.
Dr Njoroge said there will be no limit as to how much support the lenders will get.
Asked why the CBK did not offer Chase Bank such help, Dr Njoroge said banking “institutions are in a state of flux and as such the need to improve the instruments in our tool kit.”
CBK created the special facility even as it emerged that a number of local banks have lined up to buy Chase Bank on the cheap.
The Joshua Oigara-led KCB was Sunday night said to be in pole position to buy the troubled lender whose most valuable asset is its control of the small and medium-sized enterprises (SMEs) market where growth has been strong and returns big.
The list of suitors also includes Equity Bank, Commercial Bank of Africa, I & M Bank and investment firm Centum, which is said to be keen on merging Chase Bank operations with its SME-focused associate Sidian Bank (formerly K-Rep).
People familiar with the matter said negotiations went into high gear Sunday after two CEOs of the competing buyers flew in from trips abroad to support their teams in the talks.
Chase Bank owners, who have lost nearly half of their wealth with the rapid erosion of the lender’s value from about Sh30 billion late last year to about Sh14 billion currently, were said to be in favour of offers from suitors that had promised to keep the troubled lender alive as a subsidiary as opposed to those that want to swallow it up through a merger of operations.
The takeover negotiations, which are being done with the CBK’s oversight, are seen as critical to restoring faith in the troubled lender that was shut-down on Thursday in wake of Wednesday’s panic that rendered Chase Bank incapable of meeting its market obligations.
Up to Sh8 billion depositor funds left the bank on Wednesday afternoon, hours after the bank’s chairman Zuffrulah Khan and Group MD Duncan Kabui tendered their resignations.
It is expected that the transfer of Chase Bank’s ownership to a well-capitalised suitor like KCB would offer the market the assurance that is needed to restore faith in the troubled lender. Source: FINANCIAL WATCH [financialwatchngr.com]
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