State in Sh500m bail-out of lender
National Treasury has come to the rescue of State-owned Consolidated Bank of Kenya after a streak of losses almost wiped out its capital base.
As at March 31, the bank’s core capital was Sh20.6 million, a world apart from the regulator’s threshold of Sh1 billion. This stands at a mere two per cent of the Central Bank of Kenya’s minimum requirement for a sound commercial bank.
The bank’s board said it had to reach out to National Treasury, which injected Sh500 million last week to help boost its ability to lend.
“National Treasury injected a bridging capital of Sh500 million to immediately shore up capital levels and support the bank as it implements a long-term recapitalisation solution,” said the bank yesterday.
Established on December 7, 1989, out of a merger of nine insolvent financial institutions, the bank has had losses that have eaten into the capital base.
Its performance for the first-quarter ended March 31 got worse, with the net loss widening seven-fold – about Sh139 million from the Sh20.6 million loss posted in a similar period last year.
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National Treasury owns a 78 per cent stake in the bank, while National Social Security Fund (NSSF) has a five per cent stake. Other State corporations own the balance of 17 per cent. Yesterday, the bank said it was consulting other shareholders to support the recapitalisation process, without which the bank’s ability to lend would be significantly constrained.
Further, on May 10, the bank appointed a transaction adviser to help get a long-term capital solution.
“The transaction adviser is currently undertaking a comprehensive due diligence on the bank after which they will advise and help implement the most appropriate capital raising option,” said the bank in a statement.
The bank has three options so far – recapitalise through a rights issue, get privatised or be merged with other State banks. All three options have been considered before.