What you need to know:
- Auditor-General casts doubts on the bank’s “going concern” ability.
- State-owned lender seeks fresh funds barely two years after Sh1.6bn lifeline.
State-owned Consolidated Bank is eyeing a fresh bailout, barely two years after it received Sh1.6 billion support from the National Treasury, amid piling record losses that have seen it breach key regulatory requirements.
The lender has accumulated losses of up to Sh3.2 billion after it extended losses to Sh299.5 million in 2021 from a loss of Sh278.3 million in 2020 — leaving it in a financial quandary and in breach of regulatory benchmarks by the Central Bank of Kenya (CBK).
The bank’s regulatory capital ratios at December 2021 were below the CBK set regulatory minimum with total capital/ risk-weighted assets at 5.3 percent against a minimum of 14.5 percent.
Based on the bank’s financial situation, Auditor-General Nancy Gathungu has cast doubts on the lender’s “ability to continue as a going concern” even though its management maintained they would pull through with support from the State and other shareholders.
“The board is engaging the National Treasury and other potential shareholders to inject additional capital in the bank to ensure compliance with prudential capital ratios,” Consolidated Bank chairman, Peter Musei, and director Kennedy Otiso disclosed in the lender’s financial report for 2020/21.
“The National Treasury, which is a majority shareholder with 93.4 percent is committed to continuing supporting the bank to meet regulatory capital ratios and implement the 2022 turnaround strategy” he added.
Consolidated Bank has sought several bailouts from the government, and its principal shareholders since 2018 to sustain operations and finance bond repayments but the bank’s fortunes have not improved.
The bank on October 22, 2019, received a Sh1.6 billion capital injection from the National Treasury to help steady its operations.
Privatisation Commission has tried to sell off Consolidated Bank even hiring PKF Consulting Ltd to help the bank with its internal restructuring before a Sh3.5 billion deal with a strategic investor.
The deal fizzled out and the fate of Consolidated Bank is still unknown, even as the lenders’ losses have kept piling.