Chase Bank shareholders keen to recapitalise lender

BLOOMBERG

Chase Bank Kenya Ltd. shareholders are committed to recapitalising the lender placed under receivership to re-open the institution “as quickly as possible,” the central bank Governor Patrick Njoroge said.
The closely held East African lender went into statutory management on Thursday to protect it from its creditors a day after two executives stepped down following the restatements of its financial statements and amid “inaccurate” social media comments about its health.
“Our expectation is that shareholders will put liquidity in the institution that will allow the bank to be re-opened,” Njoroge told reporters in the capital, Nairobi.
Chase Bank was unable to meet its financial obligations on Wednesday, the central bank said Thursday in an e-mailed statement. The appointment of Kenya Deposit Insurance Corp. as receiver is “in the interest of its depositors, creditors and members of the public.”
Bank deposit withdrawals from the 62-branch lender on Wednesday had been “completely out of the ordinary,” he said. “In this particular case the hemorrhage was so large that at the end of the day the bank could not meet its obligations.”
Chase Bank on Wednesday sought to assure customers that it was operating normally as Chairman Zafrullah Khan and Managing Director Duncan Kabui resigned from their positions after the company lost money and auditors gave a qualified opinion on its restated results.
Chase Bank is the third Kenyan lender to be taken over by regulators since Patrick Njoroge was appointed as governor of the central bank in June. Smaller banks are starved of liquidity, with seven of the nation’s 42 institutions holding 80 percent of financial system’s cash, according to the regulator.
At the same time, they’re also having to struggle against an increase in non-performing loans with not enough money set aside to cover them.
The central bank placed Dubai Bank Kenya Ltd. in liquidation in August after it ran out of money. A court stopped the liquidation on March 20, the Nairobi-based Star newspaper reported last month. Imperial Bank Ltd. was seized by the regulators in October.
“This is not Imperial Bank,” Njoroge said, reiterating that the banking sector remained sound.
Chase Bank posted a 686.4 million-shilling ($6.8 million) loss in the 12 months through December from a profit of 2.36 billion shillings a year earlier. The bank also published restated results on Wednesday that showed loans to employees and directors in 2015 amounted to 13.6 billion shillings. On March 31, it had reported that figure as 3.24 billion shillings.
Chase Bank had yet to take possession of a $50 million loan that had been agreed with the African Development Bank, Njoroge said.
Shareholders in Chase Bank include Amethis Finance, a Paris-based company focused on investing debt and equity in Africa, Zurich-based responsAbility Global Microfinance Fund, and KfW, the German development-finance group, according to an April 2015 document published on the lender’s website. In June, it sold 4.8 billion shillings of debt as part of a 10 billion-shilling Medium-Term Note Programme.
Andreas Grenacher, regional director of KfW’s East African operations, didn’t immediately respond to e-mailed questions. Ulli Janett, a spokeswoman for responsAbility, didn’t immediately respond to e-mailed questions.
Twitter said in an e-mailed response to questions that it doesn’t comment on individual accounts. Chase Bank Chief Executive Officer Paul Njaga didn’t answer calls to his mobile phone.
Global Credit Ratings, a Johannesburg-based company, in July assigned Chase Bank an A-(KE) rating with a stable outlook.
The Singaporean banks have profited from using their wealth platforms for services such as distributing products for insurance companies and selling bonds to private-banking clients, collecting fees in the process. The companies also derive interest income from lending to wealthy customers.