Imperial Bank Limited.

Fifteen months ago, Imperial Bank Limited (K) was placed under receivership. And it’s been hope against hope for depositors waiting to access their cash.

In fact, some depositors have died due to shock, frustrations and lack of money to attend to their terminal illness aggravated by this situation, according to sources. “Homes have been repossessed, children have dropped out of school and generally previously healthy depositors have reported new diseases as a result of their plight under the fall of Imperial Bank,” says a depositor.

Investigators appear to have either hit a brick wall or have been muzzled, making Imperial Bank arguably the longest forensic audit in Kenya’s corporate world. FTI Consulting is yet to report on how the bank had successfully raised an oversubscribed bond with all the financial mess.

Even then, it has been shown that Imperial Bank Limited a haven or Central Bank employees who allowed the bank to breach rules and regulations in return for favours. The regulator’s supervision team would coach Imperial Bank management team led by Executive Director, Abdulmalek Janmohammed, on how to doctor exit reports.

CBK, though, counters that the non-executive directors (NEDs) and the shareholders who nominated them neglected their fiduciary duties and paid themselves dividends on an insolvent bank. This has produced protracted legal battles that are really hurting depositors.

Banking experts say the regulator would have sold the bank even as a discount as in the case of the recent Fidelity Bank, or the way Bank of Uganda dealt with Imperial Bank Ltd (U). After sorting out depositors, CBK would then to for the culprits of the fraud including the in-house staff.

The value of IBL has never been authenticated. Any potential buyer or investor needs due diligence to reveal the bank’s current state of affairs.

Information on how KDIC has managed the bank for the last 15 months is necessary especially with the now controversial 40% payout through NIC. It is not clear how KDIC will make the payout without selling off some of the bank’s assets, an exercise that the court has prohibited.

June 2015 financial published statements show that IBL(K) had deposits of just over Ksh52billion. With a loan book of Ksh40 billion, the bank had about Ksh12 billion at hand.

By the numbers

  1. First payout of Ksh.1 million to all account holders – Ksh8.6 billion by CBK’s calculations
  2. Second payout of 1.5 million to remaining account holders – Ksh11 billion
  3. Fees to FTI Consulting – between 1.5 billion and Ksh.2 billion
  4. Legal fees – not yet established
  5. Counsellors for IBL staff – unknown
  6. Third payout of 10% to the remaining account holders – not yet established.

All the above expenses have been met without selling the bank’s assets, except for IBU. But as things stand now, KDIC will find it hard to make more payouts without selling assets. Liquidating the bank is technically and legally impossible unless the KDIC and CBK sit down with the shareholders and agree.

Some financial experts have even proposed a merger between the good banks of Imperial (IR) and Chase Bank (IR) under a new management, leaving CBK and shareholders of both banks to legally fight it out with the bad side of the banks. NIC’s could expose itself law suits in these payouts. Alternatively, KDIC can wait until April 13th when the receivership extension lapses and the bank automatically goes into liquidation.

Long wait for money….

Given the history of liquidation in Kenya’s banking sector depositors wait in vain for their savings as the receiver managers turn the entities into gravy trains. CBK has made it impossible for any recovery efforts to progress leaving the bank only with the liquidation option.

Meanwhile, large depositors hope to get their 100% payout without more legal roadblocks.

[crp]




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