Treasury reviewing state owned bank consolidation

The National Treasury is reviewing a report over the consolidation of three state owned banks in an effort of making them more competitive.

Consolidated Bank, National Bank and the Development Bank of Kenya are the three being lined up for a merger, a process that has on several occasions stalled.

In an opinion piece in the dailies, Treasury Cabinet Secretary Henry Rotich said the report has already been handed over by the consultant, paving the way for the consolidation process.

“The National Treasury had engaged a consultant to look at the matter in a more analytical and objective approach and come up with informed recommendations. The consultant has now prepared a report which we are studying with a view to implementing the recommendations,” Mr Rotich said.

The government collectively holds a 70 percent of National Bank, 50 percent stake in Consolidated Bank and 89.3 percent of the Development Bank of Kenya.

All three banks have over the last five years phased capital and operational challenges with the government reluctant to pump in funds through a rights issue.

In the case of Consolidated Bank, a flopped rights issue to raise Sh1.8 billion left it in the red, with the bank unable to qualify for an operating license from the Central Bank of Kenya.

The bank has already entered into talks with the Treasury to find a long term solution to its financing woes.

“Consolidated Bank expects the ongoing conversations with the National Treasury on recapitalization to bear positive results. This is in addition to the restructuring undertaken by Management to reduce bad loans and generate internal efficiency,” Consolidated Bank Chairman Benson Ateng’ said.

The government also failed to commit to a Sh5 billion rights issue for National Bank initially set for 2013.

The three banks have been lined up for privatization as part of a broad parastatal reform program intended to remove the government from ownership and management of non-strategic commercial enterprises.