On Thursday 7th October 2021, a Nairobi based media outlet reported that Absa Bank Kenya Plc, had breached regulatory requirements by lending more than 25% of its core capital to a single borrower.
According to the report, Absa Bank Kenya Plc had lent Ksh 18.8 billion, equivalent to 40.6% of its core capital, to East African Breweries Plc, against its core capital of Sh46.3 billion therefore breaching the 25% limit to a single borrower as required by the Central Bank.
The management of Absa Bank Kenya has come out to clarify that there was no regulatory breaches associated with the transactions with East African Breweries Plc, a regional listed holding company, which is engaged in branded alcohol beverage business.
Ksh 19.87 Billion – Absa Total Facilities to EAB Plc
In a statement seen by Kenyan Wall Street, Absa Bank Kenya Plc noted that it had approved total facilities amounting to Ksh 10.87 Billion to the brewer, which was within its current Single Borrower Limit of Ksh 11.214 Billion.
Additionally, the lender noted that an additional Ksh 9.0 Billion was advanced to the brewer by virtue of being an agent of Absa Group, its subsidiaries, and affiliates across the continent.
South African-based financial services group Absa Group Limited is the majority shareholder of Absa Bank Kenya with 68.5% stake. Listed on the Johannesburg Stock Exchange (JSE) Absa Group, formerly Barclays Africa Group, has a presence in 14 countries with majority stakes in 11 banks located across Africa.
“Absa Bank Kenya PLC is acutely aware of its duty to keep customer information confidential and ordinarily would not divulge such information with third parties. However, in discussions with EABL and due to the unique circumstances and the inaccurate nature of this article, we have received their express consent to disclose information relating to certain transactions with us…” The bank noted in a statement.
This comes as the East African Breweries (EAB) Plc announced earlier in the week that it had received approval from Capital Markets Authority (CMA) to offer up to KSh 11 Billion Medium-Term Notes under its domestic medium-term note programme.
Proceeds from the Fixed-rate Notes will be used by EAB Plc to repay certain borrowings taken by the business, to provide working capital for the Group across East Africa and to refinance certain short term borrowings.