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CIC says Sh715m stuck in collapsed Chase and Imperial banks



CIC Insurance Group #ticker:CIC says it has Sh715 million stuck in the ill-fated Imperial and Chase banks but could have suffered worse fate. The group had put Sh1.2 billion in the collapsed Chase Bank, since acquired by Mauritius-based SBM Holdings, which it managed to withdraw but still burnt its fingers in the Chase corporate bond.

CIC Insurance Group chief executive Tom Gitogo said the large deposit a month before the lender went under. It also put Sh155 million in the Sh10 billion corporate bond maturing in 2022, of which it had impaired Sh23 million by December.

The firm has Sh560 million stuck in the collapsed Imperial Bank.

In April 2016, Nairobi Securities Exchange (NSE) suspended the trading of the Chase bond following a directive from the regulator, the Capital Markets Authority (CMA).

“We still have exposure to the Chase Bank bond. We know it was going to mature in 2022, so we have been impairing it using discounted cash flow method and taking the hit in our profit and loss account,” said Mr Gitogo.

“The method is obviously blessed and accepted by our auditors, but this was one of the key audit matters they had to raise because of the subjectivity of the activity.”

On the collapsed Imperial Bank, the insurer had not invested in the Sh2 billion corporate bond.

“We only had deposits totalling Sh560 million which we provided 100 per cent in 2016,” said Mr Gitogo.

Chase Bank collapsed on April 7, 2016, following failure to pay customer deposits after it ran out of cash.

The lender suffered massive withdrawals as it was hit by a crisis of confidence resulting from a restatement of the bank’s financial statement to reveal massive non-performing loans.

On the day the restated results were published, the managing director and the chairman were replaced, triggering further uncertainty.

CMA had approved the issuance of the bond in June 2015 and Chase Bank managed to raise Sh4.8 billion in the first tranche.

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