Jamii Bora Bank, formerly City Finance Bank, is set to hire former KCB Group deputy chief executive officer as its new CEO and has sold a significant stake to a consortium of investors to help it move to the profit zone.
The bank that has been on a loss-making streak tapped Mr Samuel Kimani as its new head and Mr Timothy Kabiru, formerly retail director at KCB, as executive director, according to a notice on the bank’s extra-ordinary general meeting slated for December 15.
The bank sold shares worth Sh410 million to a consortium of investors dubbed Messrs Asterisk Holdings to grow its retail network and beef up its capital to within reach of the Sh1 billion required by Central Bank of Kenya (CBK) before next December.
Mr Kimani and Mr Kabiru quit KCB in May following a reorganisation plan that trimmed the bank’s executive suit by half—making Jamii Bora and Family Bank key beneficiaries of the ongoing restructuring at the rival lender.
“The money will provide working capital the bank badly needs to support its growth plans including opening of new branches from next year, which will be supported by the new talent,” said a senior executive at the bank who sought anonymity.
The bank said in its notice that the sale entailed 925,000 ordinary shares to Messrs Asterisk Holdings at Sh250 each and 1.35 million subsidiary shares for Sh66 a piece—worth Sh410 million in total.
The bank did not reveal the identity of persons behind Messrs Asterisk Holdings, but individuals familiar with the deal reckon that it is a consortium of local investors that includes Mr Kimani and Mr Kabiru.
“It is very possible that the Asterisk Holdings is a special purpose vehicle formed by the ex-KCB executives who did not come in as just employees but would be targeting to turnaround the fortune of the micro-lender being seasoned bankers,” said Mr George Odo, the managing director of Africinvest—a PE fund that owns part of Family Bank.
Mr Kimani will join the list of CEOs including Mr Peter Munyiri (Family Bank), James Mwangi (Equity Bank) and Gideon Muriuki (Co-operative Bank) who have shares in banks that they head.
The hiring of the new executives signals its intention to change its business model that has targeted the low end of the market to include other products like home loans, corporate banking and forex trading.
Mr Kimani is expected to report to the bank today in an acting capacity pending the approval of the executive changes by CBK and Jamii Bora’s shareholders.
The bank—which runs a single fully fledged branch—is being run by its chief operations manager following the exit of its CEO headed by Minnie Mbue in July. The bank has been making losses since 2005 and brought in new shareholders in 2008 to shore up its eroded capital base and sharpen its competitive edge in the face of growing competition in the banking sector.
Central bank says it posted a loss of Sh84 million in 2010 compared to a loss of Sh7 million a year earlier in a period when the banks reported double and triple digit growth in profits.
It capital levels stood at Sh226 million in 2010, but it received Sh270 million from a rights issue in September—which will push its capital levels to about Sh900 million should shareholders approve the Sh410 million share deal.
The bank will have to source another Sh100 million by December 2012 to comply with the minimum capital level of Sh1 billion.
In 2009, an investment club dubbed Baraka Africa Fund bought a stake in City Finance Bank before Jamii Bora trust and Scandinavian Group moved in and changed its name to Jamii Bora Bank.
In December, the banks shareholding comprised 900 investors that initially owned City Finance Bank and now own 20 per cent, Jamii Bora trust (25 per cent), Scandinavian Group (40 per cent) and Baraka Fund (15 per cent).
Troubles at the bank started in 1998 after it was placed under statutory management after it failed to meet its financial obligations.
The bank was also adversely mentioned in the multi-billion Goldenberg scandal resulting into mass withdrawals.
In 1998, CBK recommended the closure of City Finance bank, but its high net-worth investors, who feared losing their cash, crafted a rescue plan that saw depositors holding more than Sh100,000 convert their deposit into equity.