As Kenya’s largest bank by assets, the KCB Group, prepares to take over the management of the troubled Chase Bank, details of what the move will mean for account holders, staff and other stakeholders are beginning to emerge.

Apart from preserving Chase Bank’s identity and customer base, KCB is promising to work towards retaining the talent and teams at the bank.

In an interview with The EastAfrican, KCB Group chief executive Joshua Oigara gave October as the time by when his institution would begin acquiring the majority stake in Chase Bank, which was put under receivership two weeks ago.

The KCB Group hopes to have completed the due diligence on Chase by this time.

The Central Bank of Kenya announced that the bank would be opened on Wednesday, April 27, under the management of KCB and that account holders would be able to access up to $10,000 of their deposits.

On staff, while CBK governor Dr Patrick Njoroge had indicated that it would be up to KCB to follow through with restructuring, Mr Oigara said: “It is important to understand that these employees were the forces behind the success of this bank. We would like to work with them to continue achieving this success story.”

He added that he was keen on promoting strong governance values, an indication that members of the senior management who were involved in the issues that led to the closure of the bank could be in the exit lane.

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Mr Oigara also said his bank would not necessarily use its upcoming $100 million rights issue proceeds to fund its intended acquisition of the troubled lender.

In an exclusive interview with The EastAfrican, Mr Oigara said KCB would retain the Chase brand even after acquisition of the majority shareholding.

“The primary focus in the next three to six months is rebuilding the confidence in Chase Bank. This means working with the bank staff, getting customers to bank with the institution, bringing in more deposits and business. Basically the first priority in the first three months is to return the brand to where it was and ensure the bank is running on its own. Then we will look at how the business is running, what is available. After that we can have the shareholding conversation,” Mr Oigara said.

KCB beat nine other institutions, including HF Group and the shareholders of Chase Bank, who had submitted proposals with a view to acquiring and reopening the bank.

Dr Njoroge revealed that among the bidders were two foreign institutions and three local banks.

“KCB affords us a way of moving forward in the quickest way possible. We need to hit the ground running,” Dr Njoroge said.

There are, however, fears of poaching of the accounts, a concern which Mr Oigara dismissed as a non-issue.

“There is absolutely no interest for a bank like KCB to engage in poaching of accounts as the current manager of the bank,” a source privy to the deal said.

KCB has also hinted that it will not be using any of its funds in running the bank, instead pointing to liquidity injections from internal Chase Bank sources and the Central Bank.

Mr Oigara, however, said that Chase Bank has funds and assets can easily be converted into liquidity in a period of 90 days.

“Once we are able to do this, then we can structure the facility from the Central Bank,” he said.

Investment bank Renaissance Capital (Rencap) in a note said that the KCB management remained cautious about the Chase Bank acquisition, insisting it will not commit any money until it completes due diligence.

“It is important to highlight that KCB has simply been appointed as manager and none of its funds or capital will be committed to Chase during this period” said Rencap.

In terms of its acquisition, Rencap said that it is unlikely that KCB will acquire Chase Bank for anything more than its book value, which stood at $110 million (or $56 million for a 51 per cent stake) after its financial statements were restated and accompanied by a qualified opinion from its auditors. However, KCB remained tight-lipped on what stake it would be looking for.

“Considering Chase Bank’s financial year loss last year, its current receivership status and erosion in franchise value, our best-case valuation of the bank would be book value equivalent, with a fair price being anything below that level, in our view,” said Rencap.

A source privy to the details of a memorandum of understanding signed between KCB and CBK said that they were looking at an institution that would inspire confidence in the market. The source said that KCB was chosen because of its strength and dynamism.

“We were also impressed by the indicated speed that they were willing to move with in reopening this bank, inspire confidence and even provide liquidity to the depositors,” the source said, rubbishing claims that a leading bank from Middle East was the frontrunner, “On the contrary, we did not even receive an offer from that said bank,” he said.

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Questions, however, are being raised about what kind of shareholding KCB will be looking at and whether there will be a buyout of shareholders or dilution of their shares.

The list of shareholders facing a squeeze includes Chase Bank’s former chairman Zafrullah Khan, German investment fund DEG, which is a subsidiary of KfW, a German government-owned development bank, Lake Turkana Wind Power director Carlo Van Wageningen and the bank’s employees.

It is also telling that CBK rejected a proposal from the shareholders of the bank, yet while placing it under receivership, it had said that the shareholders had hinted at injecting more capital with a view to reopening the institution.

The EastAfrican has learnt that the shareholders’ perceived role in the corporate governance problems that brought down the lender could have been their undoing.

“We were looking for a brand that was credible and would inspire confidence. Taking in the proposal from the shareholder, whose partners had been fingered as the cause of the bank’s downfall would not have inspired confidence in the market,” The EastAfrican was told.

The questions however on the creditors and bond holders of the bank remains unanswered, with both KCB and CBK remaining tight-lipped over their fate.

Capital Markets Authority CEO Paul Muthaura said that the bondholders will wait for the suspension of trading in the security at the stock exchange to be lifted.

“The moratorium on the bond still stands because despite the new development with KCB, it still remains in receivership. With the steps that have been taken with KCB stepping in as manager with a view to acquisition, it is now creating a clearer ground for us to determine the way forward concerning the date to lift the suspension,” said Mr Muthaura.