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CBK seeks alternative investors for Chase Bank

Thursday December 08 2016
chase

Chase Bank on Mama Ngina Street in Nairobi. PHOTO | FILE

Kenya’s Central Bank is considering alternatives to recapitalise the troubled Chase Bank after potential buyers opted out of investing in the mid-sized lender that is currently under receivership.

The Central Bank confirmed that some potential investors dropped their bids, but they remained optimistic that the proposed capital injection into Chase Bank would be completed during the first three months of 2017.

Last week, the banking regulator said it was considering converting some deposits and loans into equity and giving the existing shareholders a chance to buy into the bank.

“All these are on the table. By Quarter 1 of next year we will bring this to fruition,” Governor Patrick Njoroge told reporters in Nairobi.

“It is interesting that we will be in a position to choose who finally buys the bank because the current shareholders also have an interest in taking a stake in the institution,” he added.

Dr Njoroge said some of the eight potential investors — both domestic and foreign — who had expressed interest in buying Chase Bank when it re-opened in April 27 are no longer interested.

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“At the time when we re-opened Chase Bank there were eight institutions, including KCB, interested,” said Dr Njoroge.

He declined to name the institutions that have pulled out, and those still interested in buying Chase Bank, citing a confidentiality agreement.

The recent introduction of interest rate capping caused bidders to review their plans.

READ: Kenya’s banks lose investor appeal as interest caps bite

According to Maurice Oduor, an investment manager at Cytonn Investments Management Ltd, compressed margins in the banking industry as a result of the interest rate cap scared off investors.

“The prospective buyers for Chase Bank who had shown interest before the interest rates cap would have to withdraw their bids or revise them. The compressed margin will affect the earnings and effectively profitability of the banking institutions,” said Oduor.

Regulatory uncertainties have been compounded by a moratorium announced by Central Bank a year ago on licensing of new banks.

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