Mauritian lender SBM Holdings will benefit from additional deposits that are not currently part of the deal it struck with the Central Bank of Kenya if the deposits insurer made further recoveries of bad loans.
Kenya Deposit Insurance Corporation (KDIC) chief executive Mohamud Mohamud says his team will step up the recovery efforts in the what will remain of Chase Bank under receivership (CBLR) after the SBM deal.
“The 25 per cent remains under KDIC and CBLR. We will now concentrate on that and whatever we collect, we will pass it over to SBM to add to the 75 per cent of the deposits it is set to acquire. We believe this will be to the benefit of depositors,” said Mr Mohamud.
This will help depositors to gradually access more money through SBM as KDIC said that the decision by SBM to take only certain assets and liabilities did not amount to leaving out a shell portion ripe for immediate write-off.
“Whatever loans that have remained, we will pursue more aggressively through new strategies of collection. We are not writing off the 25 per cent.”
This is the first deal in Kenya where majority of an under-receivership bank’s assets are being acquired but still have the remaining portion of the institution under receivership.
Data shared by National Treasury in April during a pitch for setting up Kenya Mortgage Refinance Company showed that out of the Sh7.5 billion worth of mortgage assets held by Chase Bank, Sh4.5 billion was non-performing.
In the current deal, SBM is set to receive 75 per cent of the value of deposits under moratorium and 100 per cent of non-moratorium deposits made up all customer account deposits not more than 100,000.
According to the KDIC, the 30-day transition of the carved out assets and liabilities from Chase Bank started on Tuesday and will see, among other things, the transfer of IT systems to SBM.
Mr Mohamud ruled out possibility of downturn in systems due to change over.
“We have insulated everything and the transaction is going to be seamless. We don’t anticipate system downturns,” said Mr Mohamud.