TransCentury wants to be consulted in State bank sale

Listed infrastructure firm TransCentury #ticker:TCL has said it expects to be consulted before the proposed merger of the Development Bank of Kenya (DBK) with five other State-owned institutions is effected, signalling possible hurdles ahead for the reorganisation plan announced last week.

TransCentury, whose shares are traded on the Nairobi Securities Exchange (NSE), owns 10.7 per cent of DBK.

Head of Public Service Joseph Kinyua last week announced a plan to merge DBK with the Kenya Industrial Estates, Uwezo Fund, Youth Enterprise Development Fund, Women Enterprise Development Fund and IDB Capital Limited to form a mega bank intended to eliminate overlapping roles.

TransCentury, which purchased the DBK stake in 2006, is one of two shareholders of the bank with the Industrial and Commercial Development Corporation (ICDC), a State corporation, holding the balance of 89.3 per cent.

The move to merge DBK with other State agencies could see TransCentury’s stake highly diluted and, if the firm decides against divesting, see them co-opted into a new entity that has a larger and more complicated ownership structure.

“The process is in the initial stages as you have read and we expect all stakeholders to be engaged at the appropriate time,” TransCentury’s chief executive, Ng’ang’a Njiinu, said in an email interview.

The decision to merge, dissolve or privatise State agencies was mooted in a parastatals reforms taskforce report released in 2013.

President Uhuru Kenyatta appointed the 10-man team to review operations of parastatals which are, in many cases, loss-making, cash-sapping and bloated entities.

DBK was to be privatised as per the taskforce report, alongside other State agencies such as Consolidated Bank of Kenya, the Kenya Meat Commission, and Chemelil Sugar.

“Following request by the Treasury, the process of updating detailed privatisation proposal finalised and submitted earlier (2009) has commenced,” the report states.

DBK has just two branches in the country, on Ngong Road and Loita Street in Nairobi. The bank deals in personal, business and institutional banking.

The parastatal reforms report describes DBK’s role as “releasing funds invested by ICDC for lending to industry and other enterprises; support the growth and stability of the financial markets.”

READ: Govt to merge KIE, Uwezo fund and others into mega bank

TransCentury, which has one director on the DBK board, says it will only decide whether to become a part-owner of the new mega bank once the government’s agenda becomes clearer.

“We cannot at this stage give a view as the process has just begun. As we get more colour on the structure we shall be in a better place to state a position,” said Mr Njiinu.

DBK posted a net profit of Sh61.7 million in the full year to December 2016, a 49.2 per cent drop from the Sh121.6 million it posted during a similar period the previous year.

The lender closed the year with total deposits, loans to customers and total assets of Sh7.8 billion, Sh8.7 billion and Sh16.4 billion respectively.

“Since DBK is having challenges meeting its short-term obligations, long-term measures to raise capital which include a rights issue and the sale of Finance House are being pursued,” Edward Ouko, the Auditor-General, said in his report on the lender.

READ: Top jobs on the line as financial services regulators are merged

DBK had hoped to raise Sh1 billion from the sale of its Loita Street headquarters and another Sh3 billion through the rights issue. The Business Daily’s attempts to get a comment from the bank’s management were unsuccessful.