Consolidated Bank falls short of CBK capital ratio rules
Consolidated Bank building in Nairobi. The bank is grappling with funding woes. Photo/FILE
What you need to know:
The bank’s shareholder’s capital as a ratio to the total deposits is at seven per cent, one percentage point before the Central Bank of Kenya requirement.
Treasury had pledged to inject Sh500 million into the bank two years ago and its failure to do so could force the bank constrained to take in more deposits, stunting its growth.
Thin capitalisation forced Consolidated to let go some of its customer savings leading to a 14 per cent drop in deposits in 2013.
Consolidated Bank has failed to meet minimum regulatory capital requirements for two years running as the Treasury dithers in injecting additional funds.
The bank’s shareholder’s capital as a ratio to the total deposits is at seven per cent, one percentage point below the Central Bank of Kenya requirement.
The Treasury had pledged to inject Sh500 million into the bank two years ago and its failure to do so could force the bank constrained to take in more deposits, stunting its growth.
The delay has already seen Consolidated Bank sink deeper into losses which at Sh109 million last were three times those in the previous year.
“We are in talks with the National Treasury as a critical first step in crafting a recapitalisation plan in order to secure the bank’s future,” said Consolidated Bank chairman Benson Ateng’.
The thin capitalisation forced Consolidated to let go some of its customer savings leading to a 14 per cent drop in deposits in 2013.
Treasury secretary Henry Rotich has in the past disclosed that the government was considering privatising the lender in a plan that would involve inviting a strategic partner and selling a stake to the public through the securities market.
Consolidated Bank’s, fully owned by the government, core capital of Sh843 billion is below the required Sh1 billion ahead of new guidelines requiring higher capital that come into effect next year.
The bank is also at the centre of leadership wrangles with the selection of Geoffrey Ndambuki as the chief executive the subject of integrity queries. He was supposed to report on January 28 but claims in court papers that Mr Ateng’ locked him out of office.
Mr Ndambuki’s suitability has been questioned over claims of his poor credit rating with Consolidated Bank among the banks said to have blacklisted him as a bad borrower.
Consolidated Bank had made a total turnaround from a loss making institution by clearing its accumulated losses but it has started backsliding following the lack of support from the government.
The government’s lack of support to the bank contradicts its declaration of intention to strengthen parastatals that resulted in formation of an advisory team to guide it on how to squeeze value from the state owned corporations.
Consolidated Bank has an outstanding tranche of a Sh4 billion corporate bond to issue, but its issuance would not boost its capital compliance. The first tranche raised Sh1.7 billion in 2012 with the lender holding off the remaining tranche of Sh2 billion.
