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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