KCB to get Sh4bn Imperial deposits, loans in takeover

KCB Group #ticker:KCB will take over about Sh4 billion of the Sh53 billion outstanding deposits in the defunct Imperial Bank after completing due diligence on the lender, leaving the heavier burden on the State-run deposits insurer.

Chief executive Joshua Oigara said on Thursday that the bank’s Kenyan subsidiary, KCB Kenya, will only take over 7.5 percent each of outstanding deposits and loans as at end of July.

This translates to about Sh3.975 billion of the deposits. This leaves the Kenya Deposit Insurance Corporation (KDIC) with the laborious task of trying to realise Sh49.03 billion for depositors who had kept large sums in Imperial Bank.

“The (7.5 percent) is of whatever is outstanding which is about Sh53 billion, and that is what we will be paying 7.5 percent and we leave KDIC to resolve what remains in terms of the amount. For that, we will then exclude a number of assets and take a few. So we are also taking 7.5 percent of the loans,” Mr Oigara said.

Both KCB and KDIC did not reveal the value of outstanding loans when they disclosed the revised final bid.

“Let’s not share that with you. That’s between me and KCB,” KDIC chief executive Mohamud Ahmed Mohamud responded when asked about the outstanding loans.

KCB had earlier in the month, however, said the loans in Imperial Bank that had enough collateral were less than its earlier estimates of $100 million (Sh10 billion). The revised estimates translates to less than Sh5 billion.

KCB, Kenya’s largest lender by market share, which is also on verge of completing the acquisition of State-run National Bank of Kenya, said its commitment to take over Imperial Bank’s five branches remains intact.

“KCB conducted intense due diligence and has since revised the final offer to a takeover of 7.5 percent of the outstanding deposit balance, translating to a total recovery rate to the depositors of 38 percent. This recovery does not include 50 percent of the current loan balances linked to ongoing litigation,” KDIC said in a press statement.

An estimated 92 percent of smaller depositors had last December been granted full access to their cash through KCB, which acted as an agent of KDIC, the receiver manager of Imperial Bank, which collapsed in 2015.

KDIC said it plans to implement a risk-based premium payment model for banks from July 2020 to quicken resolution processes of collapsed banks and enhance surveillance through access to industry reports from CBK to forestall bank failures.

Mr Oigara said KCB had paid out nearly Sh6 billion additional cash on behalf of KDIC since it made a final bid to acquire a portion of assets and liabilities in “good books” in April.

“A lot of questions have been asked why it takes long. Resolving an institution is a complex process. The next steps are straightforward,” he said.