State-owned Consolidated Bank of Kenya is sustaining its operations through emergency loans from the Central Bank of Kenya (CBK) amid capital shortfalls that have seen it approach the National Treasury for fresh funding.
The lender escalated its outstanding borrowing from CBK to Sh4.72 billion in the financial year ended December 2024, marking a 51.5 percent rise from Sh3.12 billion in the prior year as it grappled with breaches of minimum capital.
The bank, whose core capital stood at negative Sh715 million at the end of last year against the required minimum of Sh1 billion turned to the CBK’s repurchase agreements (repos), incurring interest as high as 11.25 percent for the loans.
A repo is a short-term borrowing primarily used by banks to manage liquidity pressures. Under this arrangement, a bank takes cash from CBK using government securities as collateral and agrees to repurchase the securities at a later date with interest. Repos typically mature within somedays or a few months.
Consolidated Banks’ latest annual report shows it tapped three repos totalling Sh4.72 billion during the review period, being a rise from Sh3.09 billion in the prior year.
The latest repos, each with a maturity of three months, marked a continuation of the lender’s strategy to stay afloat amid capital woes.
The first repo was on October 11 last year valued at Sh1.01 billion, followed by a Sh1.66 billion repo on December 2 and Sh2.05 billion on December 11. In the prior year, the lender had tapped three repos of Sh1.02 billion, Sh651 million and Sh902 million and a one-week repo of Sh542.9 million.
The repos were secured against Consolidated Bank's Treasury bonds worth Sh4.95 billion, which represented 77.8 percent of the lender's total stock of Treasury bonds worth Sh6.36 billion.
Consolidated Bank has had capital challenges, making it hard to comply with regulatory requirements and support balance sheet and revenue growth.
The loss-making lender has reached out to its principal shareholder, Treasury, for fresh capital coming on the back of Auditor-General Nancy Gathungu flagging its negative core capital position and accumulated loss of Sh4.45 billion as posing a “significant doubt ” to its survival.
“Raising additional capital to finance growth and maintain healthy regulatory ratios is of paramount importance. The board has been in constant engagement with the National Treasury, the majority shareholder, and other shareholders to inject additional capital in the bank to ensure compliance with the regulatory ratios,” says the lender.
“The National Treasury, the majority shareholder with 93.4 percent stake, is committed to continue to support the bank to meet regulatory capital ratios and implement the 2023-2027 strategic plan.”
Consolidated Bank is among the lenders facing the pressure to raise new capital in line with the The Business Laws (Amendment) Act, 2024, which was signed into law in December 2024.
The updated law requires banks to increase their minimum core capital from Sh1 billion to Sh10 billion over the next five years. The top-up starts with an increase to Sh3 billion by the end of this year, progressing to Sh7 billion by 2027, Sh8 billion by 2028, and finally Sh10 Billion by 2029.
The bank closed March 2025 with core capital of negative Sh737.5 million, meaning it requires Sh4.73 billion to comply with the Sh3 billion minimum capital required this year.
