Chase Bank Kenya Ltd was put in receivership on Thursday after it failed to meet its obligations, becoming the third lender in the country in nine months to be placed under central bank control (i.e. Dubai Bank, Imperial Bank and now Chase Bank Kenya).
Chase Bank will be in receivership for a period of 12 months with Kenya Deposit Insurance Corporation (KDIC) acting as the manager.
Concerns about Kenya’s banking sector resurfaced last week when the chief executive of National Bank, Munir Ahmed, was put on compulsory leave pending an internal audit, as loan loss provisions pushed the lender into a loss. He called the move an over-reaction.
CBK Governor, Dr. Patrick Njoroge told a news conference on Thursday that auditors flagged concerns about loans of 16.8 billion shillings ($166 million) on Chase Bank Kenya’s books, prompting a run on deposits on Wednesday.
“No bank can sustain pressure with everybody running out,” he said.
Chase Bank failed to meet its obligations, like clients’ instructions for payments, which prompted the central bank to put it into receivership.
Njoroge said Chase Bank’s shareholders had committed to raising funds to allow the bank to be re-opened soon and that the problems were not as bad as that of another lender under receivership, Imperial Bank.
The balance sheet clean-up had put Kenya’s financial sector “in a much better position,” Njoroge said.
Chase Bank said on Wednesday its chairman, Zafrullah Khan, and group managing director, Duncan Kabui, had resigned.
The African Development Bank, which last week agreed to lend Chase $50 million for onward lending but had not disbursed the funds, said the receivership would not stop it from supporting the sector.
“The African Development Bank remains confident about the stability of the financial sector in Kenya,” its regional boss for East Africa, Gabriel Negatu, said in an interview with Reuters.
Chase Bank in June 2015 sold 4.8 billion shillings of debt as part of a 10 billion-shilling Medium-Term Note Program.
Shareholders in Chase Bank include Amethis Finance, a Paris-based company focused on investing debt and equity in Africa, responsAbility Participations AG, a Swiss investment company known as rAP, and KfW, the German development-finance group.
Global Credit Ratings, a Johannesburg-based company, in July 2015 assigned Chase Bank an A-(KE) rating with a stable outlook.
Note that Chase Bank Kenya was awarded a license less than a year ago from the regulator to become an authorized securities dealer (ASD) in Fixed Income Securities.
Sources: (Reuters, Bloomberg, Kenyan Wall Street, Central Bank of Kenya, CMA Kenya)
