KCB deal gives Imperial Bank depositors access to more money
Friday April 05 2019
Imperial Bank depositors protest outside the bank’s headquarters in Nairobi, in October 2016. PHOTO | NMG
Regional lender KCB Bank has made a final offer for troubled Imperial Bank in a deal that could see depositors recover more of their savings.
KCB had requested a modification of its binding offer last month after completing the verification of Imperial Bank loan book estimated at Ksh70 billion ($700 million).
In a joint statement, the Central Bank and the Kenya Deposit Insurance Corporation (KDIC) said they had accepted the final offer by KCB.
“CBK and KDIC announce the acceptance of the final offer from KCB, which further enhances recovery for depositors,” they said. It said depositors would access as much as 20 per cent more of the money held in the bank with the final offer.
The regulators had accepted KCB’s binding offer to buy out the good bank (performing assets and liabilities) of Imperial Bank on December 11, 2018.
KCB promised to pay depositors 12.7 per cent of their balances within two weeks, granting an estimated 92 per cent of the eligible depositors full access to their balances, according to CBK and KDIC.
The pay-out programme offered full access to depositors with balances of up to Ksh2.7 million ($27,000), increasing total savings recovery to about 35 per cent of original eligible deposits held at the date of Imperial Bank’s receivership in October 2015.
With the final offer the recovery rises to 55 per cent, with the balance being paid over four years.
The money would earn interest at prevailing market rates, the statement said.
The regulators said the acceptance of KCB’s final offer would lead to a further recovery of 19.7 per cent of eligible depositor balances remaining at Imperial.
“CBK and KDIC assess that KCB’s Binding Offer represents a viable proposal for the further resolution of IBLR, for the benefit of depositors and the strengthening of the Kenyan financial sector,” said the regulators.
“It is expected that the transaction will be concluded expeditiously.”
However, CBK and KDIC did not disclose details on when the agreement was going to be signed.
Under the new depositor repayment programme 12.5 per cent of the remaining balances due to eligible depositors will be released on completion of the signing of the final offer agreement, 12.5 percent on the first anniversary of the signing and 25 percent each on the second, third and fourth anniversaries respectively.
However, the deposits recovery does not include an estimated Ksh36 billion ($360 million) of loans, translating to 50 percent of the current loan balances, linked to ongoing litigation.
As part of the buyout plan KCB will take over five (5) branches of IBLR, while CBK and KDIC would have to explore options for the remaining 22 branches and staff.
Imperial Bank went into receivership in October 2015, collapsing with an estimated Ksh85 billion ($844.3million) belonging to 50,000 depositors.
KCB won the bid to take over the troubled lender in July last year (2018) and promised to absorb some Imperial Bank branches and employees.