Investment firm FEP buys 5 per cent stake in Nyachae’s Credit Bank

Fountain Enterprises Programme (FEP) Group has acquired a five per cent stake in Credit Bank as it awaits regulatory approval to take controlling interest in the third-tier bank chaired by politician Simeon Nyachae.

FEP bought the stake in late 2015 after Credit Bank dropped a private placement share offer after the Imperial Bank scandal scared potential sector investors.

Credit Bank chief executive Chege Thumbi acknowledged that FEP had bought five per cent stake but declined to give further details on the entire stake the investment group founded by evangelical churches is eyeing.

“This is a diversified group of Kenyan investors with interests in various sectors. They have already invested five per cent of the bank and are waiting for the Central Bank of Kenya (CBK) approvals to acquire majority stake in the bank,” Mr Thumbi told the Business Daily.

Credit Bank had gone to the market to raise Sh1.8 billion through a private share placement.

The information memorandum on the offer dated September 2015, said the bank was looking at raising additional funds for expansion by selling 10 million shares at Sh180 each.

If the offer was fully-subscribed it would have resulted in new shareholders taking a 44.99 per cent stake in the lender.

Credit Bank’s major shareholders include Mr Nyachae family companies, directors Ketan Morjaria who has a 16.20 per cent stake and Jay Karia (8.01 per cent).

FEP’s funds will be used for the bank’s expansion with the investment firm expected to bring in new customers.

“FEP has a widespread network of membership across the country that currently stands at 174,000 registered individuals. We consider this to be our captive market with an estimated conversion rate of 70 per cent to new and operational deposit accounts,” said Mr Thumbi.

READ: Fountain Enterprise gets CBK nod to open microfinance bank

The memorandum shows the small bank had an asset base of Sh9.1 billion as at July 2015 and was ranked 38 out of Kenya’s 43 banks. As at the end of July the bank had a net profit of Sh12.3 million having recovered from a Sh91.7 million loss for the 2014 financial year.

Should the CBK give the go ahead for FEP to acquire the controlling stake, Credit Bank will join Fina and EIB in getting strategic investors.

Nigeria’s GT Bank bought a 70 per cent stake in Fina Bank in February 2014 while Mwalimu Sacco bought 51 per cent of Equatorial Commercial Bank in 2015 with plans to buy an additional 24 per cent.

The CBK did not respond to queries on how far the approval process has gone.

The regulator issued a moratorium on licensing of new banks last November but said the move is not permanent noting that mergers and takeovers would still be allowed.

Several local and foreign finance institutions have expressed interest in setting up banks. Dubai Islamic Bank and Unaitas Saccos were planning to enter the Kenyan banking industry.

“We are very much committed to the transformation agenda of conversion, we hope that this suspension is lifted soon so that we can continue with our pursuit to become a bank with a difference,” said Unaitas chief executive Tony Mwangi.

He said while the bank would prefer to fully convert its operations, it is still open to other options that would make it enter the banking industry.

“Our continued strength and organisation culture cultivated over the years would best be enhanced through a greenfield conversion rather than the other available options. That notwithstanding the option of buy-off is still open for consideration as well,” he said.

The Business Daily separately learnt Unaitas was one of the investors looking at Credit Bank as an option.