SBM Holdings acquired Fidelity Bank for Sh100 and rebranded it to SBM Kenya in May, a transaction Moody’s says cut its capital cushion against unexpected operational shocks by 3.7 percentage points.
Mauritian lender SBM Holdings will be forced to limit dividend payouts to shareholders to maintain current cash buffers following the takeover of bottom-tier Fidelity Bank Kenya, research economists at Moody’s have said.
The Mauritian second largest bank acquired the lender for Sh100 and rebranded it to SBM Kenya in May, a transaction Moody’s says cut its capital cushion against unexpected operational shocks by 3.7 percentage points.
The buffers, technically known as common equity Tier 1 (CET1) capital ratio, was introduced in 2014 following lessons from 2008 financial crisis to help banks absorb unexpected losses arising from normal operations.
“SBM Holdings reported a CET1 ratio of 16.2 per cent as of September 2017, which is down from 19.9 per cent as of December 2016 because of SBM’s acquisition of a Kenyan bank this year,” Moody’s said in a credit outlook report on Monday.
The report suggests the high level of capital held by the growth-hungry lender may come under more pressure due to its planned expansion into Africa.
Kenya remains the focal point of SBM Africa’s expansion strategy. The lender received regulatory go-ahead on October 9 to acquire the good assets and liabilities of mid-tier Chase Bank (in receivership) subject to a due diligence.
SBM last month reportedly pushed back a planned inspection of Chase assets and liabilities because of unfavourable political environment.
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