Kenya Evaluating More Than Five Offers for Failed Chase Bankby
Suitors stepping forward are local and international
Governor Njoroge says central bank support has calmed markets
Kenya’s central bank is evaluating more than five offers from potential local and foreign suitors for Chase Bank Kenya Ltd., which was placed into receivership last week, Governor Patrick Njoroge said.
The nation’s regulators were forced to step in with emergency support to stem depositor panic after the collapse last week of Chase Bank, the third lender to be placed under statutory management since August. A run on Chase Bank, which was Kenya’s 11th largest at the time it was placed into receivership on April 7, gathered pace as the lender’s chairman and group managing director resigned shortly after announcing restated earnings with a qualified audit opinion.
The most important objective is to re-open Chase Bank, Njoroge told reporters in the capital, Nairobi, on Friday. Regulators had no choice but to isolate Chase Bank and appoint caretakers to protect the company from its creditors and manage it back to health, he said, adding that the lender hadn’t provided auditors with sufficient data on non-performing loans.
A liquidity support facility provided by the central bank, with tenures from seven days to four weeks, has helped to calm markets, Njoroge said. No lenders have used the facility yet, although many are keen to meet with the central bank to understand how it works, he said.
The central bank will not take over any lenders and the nation’s financial institutions should look to natural consolidation, Njoroge said.
Mergers and acquisitions are inevitable in the $61 billion economy, where 42 banks serve 44 million people, compared with 22 banks in Nigeria, which has a population of 180 million and gross domestic product that is nine times bigger, according to Cytonn Investments Management Ltd., a Nairobi-based money manager.
The central bank was comfortable with the industry as commercial banks had cleaned up their balance sheets and were provisioning well for non-performing loans, Njoroge said. “We have passed the tipping point, we are at a new normal.”
Commercial banks hadn’t been setting aside enough for bad loans and pushed lending rates higher to boost profits, he said.
“It was a race to the bottom line, now it’s over,” Njoroge said. “We will have sharper numbers and its much easier for banks to lower interest rates now.”