Inside Chase Bank’s journey to recovery four months after reopening its doors

Corporate News

Chase Bank receiver manager Paul Russo. PHOTO | DIANA NGILA 

By DAVID HERBLING, hdavid@ke.nationmedia.com

Chase Bank was on April 7, 2016 unexpectedly placed under receivership saddled by a liquidity crisis arising from a run on the mid-sized lender by panicked depositors.

The Central Bank of Kenya (CBK) later appointed KCB as receiver manager, paving the way for the bank’s reopening on April 27, 2016. 

A due diligence report detailing the financial health of Chase Bank was due to be handed over to the CBK on August 31, marking a homestretch for its sale to a strategic investor.

The Business Daily talked to Paul Russo, the KCB group human resource director who is also the Chase Bank receiver manager, on the status of the mid-sized lender and its path to full recovery.

It’s now more than four months since Chase Bank reopened, please give us a snapshot of what the bank looks like from the inside in terms of new accounts opened or closed, amounts deposited, amount withdrawn, total cash transacted.

As at August 30, 2016 the total inflows (mix of deposits and transactions) was at Sh18.7 billion. The number of new accounts opened is at more than 4,500.

Some of the milestones we have achieved since reopening on April 27, 2016 include allowing small depositors to access up to Sh1 million, activating ATM services, real-time gross settlement, limited lending for trade finance services up to Sh5 million, restoring VISA services and correspondent banking with Deutsche Bank.

KCB is set to earn a management fee as receiver manager. How much is this and how is it calculated?

The computation is on a direct cost basis and largely based on direct cost of staff deployed during the period of management contract. KCB bills purely on direct cost. We had 117 members of staff at the beginning and have since scaled down to six.

What is the current liquidity position of Chase Bank given the lender was closed for being unable to meet its obligations? What is the liquidity ratio? Cash held at CBK? 

I can confirm that Chase Bank’s liquidity has improved significantly since reopening. At the moment, the bank is exempt from reporting under receivership but I am aware that this remains a matter of interest to various stakeholders. In due course and at the appropriate time, the CBK will be in a position to share the details.

What is the latest financial health of Chase Bank in terms of loan book size, deposits, net profit, and capital adequacy ratios?

Chase Bank’s financial health is certainly improving. The commitment of the customers and dedication of Chase Bank staff has been phenomenal. I remain positive about Chase Bank’s future prospects.

Which services are yet to resume at Chase Bank?

We have resumed all services — term deposits, lending, all off-balance sheet support, credit cards, transactions on point of sales services, all 62 branches open and running, mobile to bank and agency banking.

KCB remains interested in being part of the future of Chase Bank through an independent and transparent process.

Why did you send home a number of Chase Bank top managers (HR, risk, legal, credit, COO, business development)?

As with any organisation, employees are at liberty to leave an employer and seek new opportunities that are a fit with their career objectives. In this case, there was nothing out of the normal in the separation process. It was mutual separation.

Who is the statutory auditor for Chase Bank? Does Chase Bank have audited results as of June 30? Have they been published?

My understanding is that the law provides for an annual audit when in receivership. A plan is under way to appoint a suitable audit firm to undertake the requisite audit.

There have been queries on your background as HR person to be receiver manager. How do you respond to this?

Reopening Chase Bank was all about people. Running a bank is about two things: people and technology. Chasers (as Chase Bank customers are fondly known) are not typical bankers.

If you brought in a traditional banker, they would not understand the culture. I’m confident that in future CEOs will be HR professionals.

We know how to motivate people to deliver strong results. People don’t understand my background and experience. I worked at Barclays for 14 years on multiple projects across many countries. I’m a change management professional.