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Local, foreign suitors jostle to buy Chase Bank

The race to acquire troubled Chase Bank is fast turning out to be between its shareholders, two of Kenya’s largest lenders and three foreign firms that could trigger a wave of mergers and acquisitions, swallowing up small banks.

It has emerged that the shareholders of Chase are keen to retain the institution and have offered to raise the capital required to reopen the bank even as large lenders who have placed bids wait to pounce on the offer.

The Central Bank of Kenya on Friday announced that it had received more than five offers for the bank that, at the time of its collapse, was the 11th largest lender out of 43 with a total asset base of Sh142 billion.

Apart from Kenya Commercial Bank, the rest of the banks that have placed offers are playing their cards close to the chest in what observers say is a deliberate strategy to protect their image if their bids fail.

However, sources at CBK say a Middle East bank and another in Africa with huge financial muscle are among those willing to fork out the Sh20 billion required to acquire the bank.

The two banks, it is said, have been yearning to enter the local market since last year but have been unable to do so because of a ban by CBK Governor Patrick Njoroge on licensing new banks.

POOR GOVERNANCE

Investment company Centum, which recently launched K-Rep Bank as Sidian after it acquired a majority shareholding, is also said to be in the race, a claim its director of Investments and Development Fred Murimi denied.

“No, we are not interested,” he said.

Dr Njoroge has met Chase shareholders at least twice and it is understood they offered to inject capital to reopen the bank as quickly as possible.

During his Friday media briefing, Dr Njoroge declined to comment on what was discussed and instead talked about how well they were working together compared to Imperial Bank.

“Chase is much easier, Imperial is much tougher. The problems of Chase Bank are really liquidity and poor governance and you can identify the poor governance issues,” said Dr Njoroge.

“The shareholders are much more appreciative and although they may not have the money to do XYZ, our objectives are aligned,” he said.

CBK is understood to have asked the shareholders to figure out how to recover the Sh13.62 billion lost through insider lending if they are to reopen.

UNDER RECEIVERSHIP

At Sh13.6 billion, Chase Bank’s insiders borrowed more than the lender’s total shareholder funds (equity), which stands at Sh11.19 billion, forcing it to collapse after a run on the bank

“Do you think KCB have problems, they are the biggest bank in the country? Them making a bid is not a sign of bad things,” said our source.

“So far the bids are all good and the decision that will be made will largely depend on the liquidity of the banks,” said the source.

When it was placed under receivership, Chase had about 170,000 depositors, 62 branches, Sh142 billion in assets and a three per cent market share. It had started expanding to open 20 more branches.

Apart from its assets, its niche market of youth, women’s groups and SMEs makes it appealing for any local bank or a foreign one seeking to enter the Kenyan market.

By comparison KCB, which is among the frontrunners, had 12.9 per cent market share, 175 branches, Sh366 billion in assets and Sh276 billion deposits at the end of the last financial year. Equity Bank had an 8 per cent market share, Sh277 billion in assets and Sh202 billion in deposits.

Should either of the two acquire Chase, analysts say it would trigger massive buyouts of smaller banks and mergers.