The Treasury has suspended further investments in Consolidated Bank of Kenya Ltd (CBKL) pending the privatisation of the State-owned lender grappling with falling deposits, a shrinking loan book, increased impairment costs, and capital constraints.
Lawrence Kibet, the director-general in charge of public investments and portfolio management at the Treasury, said the government has not allocated funds for investment in the lender pending the transfer of its ownership to private investors.
“Consolidated Bank is one of the entities undergoing privatisation, there is no budgetary allocation for capitalisation in the current budget,” he said in an interview.
The lender has been banking taxpayers to fund a recovery strategy involving branching into digital banking, product innovation, and growing non-funded income.
For instance, the bank on October 22, 2019, received a Sh1.6 billion capital injection from the Treasury to help steady its operations.
Its fortunes have not improved though, with Auditor-General Nancy Gathungu raising a red flag over the lender’s business, saying its current liabilities balance of Sh14.47 billion exceeded current assets of Sh14.43 billion by Sh 41.02 million in 2023, and the bank’s continued operations largely depend on State support.
The bank’s regulatory capital ratios as of December 31, 2023, were below the regulatory minimum, with total capital/risk-weighted assets at 4.46 percent against a minimum of 14.5 percent, while the core capital/risk-weighted assets stood at 4.46 percent against a minimum of 10.5 percent.
The lender and Development Bank of Kenya (DBK) are lined up for sale to cut reliance on the Exchequer and recoup money to be diverted to development projects.
The government owns an 89.3 percent stake in DBK through the Kenya Development Corporation, while the Nairobi Securities Exchange-listed TransCentury Limited owns a 10.7 percent stake. It also fully owns CBKL, with the Treasury holding 93.4 percent of the shares in the loss-making lender, while the rest are spread over 25 parastatals and other quasi-government agencies.
Consolidated Bank was formed in 1989 when nine failing lenders were lumped together, including Jimba Credit Corporation, Union Bank of Kenya, Kenya Savings and Mortgages, Estate Finance Company of Kenya, Estate Building Society, Business Finance Company, Citizen Building Society, Nationwide Finance Company, and Home Savings and Mortgages.
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 by the Privatization Commission to raise funds for the exchequer.
This includes energy firms KenGen, and Kenya Pipeline Company, hotels such as Kabarnet Hotel, and Golf Hotel, and sugar firms such as Miwani and Muhoroni.
Other firms include the Agrochemical and Food Corporation, East African Portland Cement Company, and the Kenya Meat Commission.
