KCB trims payout to Imperial Bank depositors after revised offer


KCB trims payout to Imperial Bank depositors after revised offer
KCB Chief Executive Officer Joshua Oigara adresses an investor briefing during the bank's update of its 2019 half year earnings on August 15 PHOTO | COURTESY

KCB Group has trimmed its final payout to deposits held under the Imperial Bank Limited in Receivership (IBLIR) by Ksh.6.5 billion in a revision of its final offer.

The lender will now take on a lesser 7.5 percent of IBLIR deposits and a similar margin of the performing loans portfolio having cut back on its April’s 19.7 percent concluding offer to depositors.

April’s final offer which bears the approval of the Central Bank of Kenya (CBK) sits alongside the curving out of five strategic branches of IBLR to include two in Nairobi, and one each in Mombasa, Diani and Eldoret.

The offer follows the disclosure of the deterioration of IBLR net assets by KCB earlier this month, a factor which is partly attributable to the revision.

KCB’s re-evaluation of IBLR’s ‘good book’ at Ksh.5.2 billion ($50 million) from a higher Ksh.10.3 billion ($100 million) 12 months ago, pointed to a likelihood of worsening non-performing loans and heightened impairment losses.

Regardless of the shaving to depositors, KCB Chief Executive Officer Joshua Oigara who doubles as the Kenya Bankers Association Chairman has lauded the final offer as historic given Imperial Bank still lies grounded.

“We are paying depositors even before seeing a resolution of the bank. This is a first for the IBLIR custodians  and represents a very unique innovation,” he said.

The innovation in play involving both the CBK and the Kenya Deposit Insurance Corporation (KDIC) is a marker to the custodians ongoing efforts to protect the interest of depositors and creditors in what makes for the pursuit of a quick resolution to the collapse of banks.

The recovery of the additional Ksh.3.98 billion bring the cumulative depositors payout to 38 percent of all substantiated deposits in the bank with KDIC having availed one third of eligible funds to 92 percent of depositors in December 2018.

The payout does not however include an estimated Ksh.36 billion of depositors funds stuck in ongoing litigation.

Depositors who have since received payments accruing to an excess of Ksh.6 billion will receive the revised payout by KCB in three tranches beginning with a clearance of Ksh.500 million (12.5 percent) upon the signing of the final binding offer between KCB and KDIC.

A further sum of Ksh.500 million will be paid out on the signing’s first anniversary while the remaining amount will be cleared in three equal installments of Ksh.1 billion (25 percent) in subsequent anniversaries to the binding offer signing.

While the resolution of IBLR has dragged on to the third year, the KDIC has expressed confidence in hastening the resolution of collapsed banks through installing additional provisions to guide the process.

According to KDIC Chief Executive Officer Mohamud Ahmed, the corporation is mulling to have banks create establish wills in addition to the strengthening of the already existing CBK camels-rating of risks taken on by the lenders including capital adequacy and liquidity ratios.

“We would like banks to eventually do a resolution plan which essentially gives us living wills in case of failures entailing details on how the lender would want the succession of their estates to be. There is always another other side to the greener one,” he reckoned.

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Story By Kepha Muiruri
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