Corporate News
People walk past a Consolidated Bank branch in Nairobi. PHOTO | FILE
By VICTOR JUMA, vjuma@ke.nationmedia.com
In Summary
Consolidated Bank says the Treasury is committed to
recapitalising the company even after it failed to back the lender’s
recent maiden rights issue, a move that cost it an operating licence.
The bank’s Sh1.8 billion cash call collapsed after its
principal shareholders, led by the Treasury, snubbed the transaction
leaving it to continue breaching capital adequacy ratios.
In its second year without an operating licence
from the Central Bank of Kenya, Consolidated Bank is among lenders
enjoying an implicit state guarantee.
“With regards to the licensing of the bank, we have
the full support of the National Treasury on the recapitalisation
efforts and we expect this matter to be resolved in due course once the
ongoing discussions are concluded,” Consolidated said in a statement.
It remains to be seen whether the Treasury will provide new funds, alongside other shareholders, to the lender.
The government meanwhile is still considering merging Consolidated Bank with other state-owned lenders including National Bank of Kenya as a means of resolving their capital, management and operating challenges.
“The 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,” Treasury Secretary Henry
Rotich said.
Consolidated Bank, majority owned by the
government, has been struggling with capital adequacy in the last three
years and had planned to raise Sh1.8 billion through a cash call
launched in February this year.
Capital limitations have seen the lender slip back
into the red, reporting a Sh71 million net loss in the six months ended
June, compared to a net profit of Sh35 million a year earlier.
Shareholders of the bank had approved the cash call
in an extra-ordinary general meeting called by the bank in December
last year. The rights issue opened on February 1 and was to close on
April 4.
The bank was offering shareholders two new shares
for each one held which would have seen it issue 89,840,000 new shares
at Sh20 each.
The lender’s shareholders include the Treasury
(77.9 per cent), National Social Security Fund (five per cent) and the
defunct Kenya National Assurance (4.3 per cent).
Others are the Kenya National Examination Council
(1.5 per cent), Kenya Pipeline (1.6 per cent) and National Hospital
Insurance Fund (1.3 per cent).
The Treasury increased its shareholding last year
from 50.1 per cent after it converted a Sh500 million loan issued to the
bank in 2014 to equity. The Treasury received 25 million new shares in
the transaction.
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