Regional lender KCB has offered to acquire 30 per cent of the troubled Imperial Bank’s “good” assets, while the rest will be offered to other commercial banks.
Marketing of the Imperial Bank loan book to other Kenyan lenders will start once the agreement with KCB is concluded and signed, sources told The EastAfrican.
If the offer is successful, Imperial Bank depositors will have access to more of their funds.
The EastAfrican has learnt that KCB’s final deal involves acquisition of 25 per cent to 30 per cent of Imperial’s non-toxic assets and liabilities at no cost.
Last year, the State Bank of Mauritius (SBM) Holdings acquired 75 per cent of the good asset and liabilities of Chase Bank, which was then under receivership, on similar terms.
“Under this deal, the regulators [Central Bank of Kenya and the Kenya Deposit Insurance Corporation] expect eligible Imperial Bank depositors to access more funds and boost depositors’ confidence in the banking industry,” said a source.
KCB declined to comment on the deal and referred us to the regulators, who had not responded to our enquiries by the time of going to the press.
“On this matter, please refer to the CBK and KDIC. For now, the details are as per the statement issued last week,” said KCB in response to our queries about the deal.
Last month, KCB had requested a modification of the terms of its binding offer after completing the verification process of the lender’s loan book, estimated at more than Ksh70 billion ($700 million).
Through its final offer, KCB agreed to increase its compensation for eligible Imperial Bank depositors by an additional 20 per cent.
In a joint statement, the regulators 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.
The regulators had accepted KCB’s binding offer to buy out the good bank (good assets and liabilities) of Imperial Bank on December 11, 2018.
As a result, KCB promised to pay off eligible depositors of Imperial Bank 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 approximately 35 per cent of original eligible deposits held at the date of Imperial Bank’s going into receivership in October 2015.
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 Imperial Bank, for the benefit of depositors and the strengthening of the Kenyan financial sector,” said CBK and KDIC.
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 per cent on the first anniversary of the signing and 25 per cent each on the second, third and fourth anniversaries respectively.
According to CBK, interest rates payable on deposit balances will be in line with existing deposit products.
However, the deposits recovery does not include the realisation of an estimated Ksh36 billion’s ($360 million) worth of loans—50 per cent of the current loan balances—linked to ongoing litigation.
As part of the buyout plan KCB will take over five branches of Imperial Bank, while CBK and KDIC would have to explore options for the remaining 22 branches and staff.