State steps up sale of troubled Consolidated Bank, Development Bank

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The Privatisation Commission is seeking to value two state-owned banks as it prepares to accelerate their sale and use the proceeds for development.

In the latest disclosure, the commission said it’s recruiting consultants to advise on the planned sale of the government’s stake in the Consolidated Bank of Kenya Limited (CBKL) and the Development Bank of Kenya (DBK).

The government owns an 89.3 per cent stake in DBK through the Kenya Development Corporation, while Trans Century Limited, which is listed by the Nairobi Securities Exchange, owns a 10.7 per cent stake.

It also fully owns CBKL with the National Treasury holding 93.4 per cent of the shares in the loss-making lender while the remaining shareholding is spread over 25 parastatals and other quasi-government agencies.

“The advisors will be required to review the financial performance, highlight key parameters and prepare projections necessary for the business valuation of Development Bank,” said the Commission.

The commission says the privatisation will help the lenders access much-needed cash injections. CBKL has been relying on bailouts from Treasury amid piling losses. The bank had expressed intent of requesting more funds from the government.

“Capital still remains a challenge and the Bank is keen on addressing the capital challenges by engaging its majority shareholders, the National Treasury and National Social Security Fund. This is to ensure compliance with the regulatory requirements and support future growth as per the Bank’s strategy,” it stated in its 2021 annual report.

The lender sunk further into losses in 2021 with a Sh299.5 million loss from Sh278.3 million in 2020 to record a Sh3.2 billion cumulative loss.

The bank’s capital adequacy ratio stood at 5.3 per cent by December last year, in breach of the Central Bank of Kenya (CBK) minimum threshold of 14.5 per cent.

The commission has previously tried to sell CBKL and hired PKF Consulting to help the lender through an internal restructuring.

“The main objective to be achieved through the privatisation of CBKL is to mobilise necessary resources to support the bank’s future growth. It will also support the growth and stability of the financial sector... and recoup part of the government’s investment to finance other development projects.”

Resorted to loans

DBK is faring a little better than CBKL as its net profit for 2021 jumped by 146.78 per cent to Sh53.8 million up from Sh21.83 million in 2020. It also paid Sh600 million as part of the debt it owed CBK while its customer deposits grew by Sh1.1 billion.

The lender resorted to loans from CBK after the massive withdrawal of funds by customers in 2016 due to panic following the collapse of Chase Bank and Imperial Bank.

The two lenders are among more than two dozen state-owned enterprises that have been earmarked for the sale of whole or part of their government stakes.

This includes energy firms KenGen, Kenya Pipeline Company, Miwani and Muhoroni sugar firms, East African Portland Cement and the Kenya Meat Commission.

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