KCB pays Sh10 in takeover of collapsed Imperial Bank

KCB Group chief executive officer Joshua Oigara. FILE PHOTO | NMG

By VICTOR JUMA
More by this Author

Summary

• The transaction means the lender is inheriting a potentially profitable business without paying a premium.
• It highlights the high price bank owners can pay for running down their institutions to the point of being forced to sell for almost nothing under the supervision of the Central Bank of Kenya.
• The regulator shut down Imperial Bank in 2015 after a large-scale fraud running into billions of shillings came to light, with the lender’s management and third parties accused of siphoning cash out of the company.

KCB Group will pay Sh10 to take over five branches and a portion of loans and deposits of the collapsed Imperial Bank, the country’s biggest bank has disclosed.

The transaction means the lender is inheriting a potentially profitable business without paying a premium.

“Our cost in the Imperial Bank transaction is 10 US cents (Sh10). It’s a peppercorn (nominal) value,” Joshua Oigara, KCB chief executive, told the Business Daily.

It highlights the high price bank owners can pay for running down their institutions to the point of being forced to sell for almost nothing under the supervision of the Central Bank of Kenya.

The regulator shut down Imperial Bank in 2015 after a large-scale fraud running into billions of shillings came to light, with the lender’s management and third parties accused of siphoning cash out of the company.

Payments of such small sums are necessary to give validity to commercial contracts where acquirers are not expected to pay a premium for the assets they are inheriting.

KCB’s deal mirrors that of Mauritius’ SBM Holdings which paid Sh100 to take over Kenya’s Fidelity Commercial Bank, with a commitment to inject additional capital into the small lender.

Unlike other businesses, banks are heavily regulated and failure to comply with conditions laid out in their operating licences can force their closure and sale to third parties.

For Imperial Bank customers, KCB’s deal gives them access to their deposits.