Half of the Sh26 billion non-performing loans (NPLs) in the banking sector between June and August came from the transaction that saw SBM acquire certain assets and liabilities from Chase Bank last month.
This led to the jump in NPLs ratio from 12 per cent in June to a high of 12.7 per cent in August.
Last month, Kenya Depositors Insurance Corporation chief executive Mohamud Mohamud said investors who bought Chase Bank corporate bonds worth Sh4.8 billion would be catered for under the remaining portion of Chase Bank after the SBM deal.
Mauritian lender SBM Bank of Kenya will have to find a way to turn the Sh13 billion bad loans picked from Chase Bank to performing loans or take a hit.
Central Bank of Kenya (CBK) governor Patrick Njoroge disclosed on Wednesday that half of the Sh26 billion non-performing loans (NPLs) in the banking sector between June and August came from the transaction that saw SBM acquire certain assets and liabilities from Chase Bank last month.
“As you can imagine, there were specific loans that were non-performing and so they moved over. SBM will endeavour to resuscitate these loans in a particular way,” he said.
This led to the jump in NPLs ratio from 12 per cent in June to a high of 12.7 per cent in August.
However, Dr Njoroge said this does not send a negative signal in the banking sector since, in the absence of this one-off deal, the NPL ratio would be at a lower 12.1 per cent.
He attributed the one percentage point rise mainly to delayed payments from government and the private sector.
Dr Njoroge the completion of SBM-Chase deal paved the way for depositors to access about Sh54 billion and now allows the CBK to focus on the remaining bit of Chase Bank. “Further work is needed now that the dust has settled. We need to engage the creditors with a view of maximising the return to all stakeholders,” he said.
Last month, Kenya Depositors Insurance Corporation chief executive Mohamud Mohamud said investors who bought Chase Bank corporate bonds worth Sh4.8 billion would be catered for under the remaining portion of Chase Bank after the SBM deal. Under the law, creditors rank lower to depositors when it comes to compensation.
Investors are also sweating on Imperial Bank’s Sh2 billion bond even as the CBK said on Wednesday it was still engaging Kenya Commercial Bank #ticker:KCB to improve the offer of acquiring assets and liabilities from the bank under receivership.
“We have been working with them to improve on their proposal. We will then look at it and explain to depositors and execute it. It follows the same design we followed in Chase Bank,” said Dr Njoroge.
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