DTB Kenya Is Said to Emerge Winner to Acquire Imperial Bank

(Bloomberg) -- Diamond Trust Bank Kenya Ltd. has been selected to acquire Imperial Bank Ltd. in an effort to revive the troubled lender that was placed in administration 2 1/2 years ago, according to a person with knowledge of the matter.

The listed lender’s bid won in a process that will see DTB acquire both the assets and liabilities of the collapsed bank, the person said, declining to be identified because they’re not authorized to speak on the matter.

The central bank and the Kenya Deposit Insurance Corp. said last year that three companies had expressed interest in taking over Imperial, without naming them. KCB Group Ltd., Kenya’s biggest lender by assets, is one of them, the person said. KCB Corporate Communications Manager Peter Mwaura declined to comment.

DTB’s offer was ranked the best and negotiations over the acquisition of the so-called good assets are still going on, the person said. DTB shares have gained 9.4 percent this year to 210 shillings at the Nairobi Securities Exchange.

KDIC Chief Executive Officer Mohamud Ahmed Mohamud declined to confirm DTB’s selection, saying the sale process is still in progress. A central bank spokesman declined to comment, referring Bloomberg to a presentation Governor Patrick Njoroge made to lawmakers on Thursday.

“We did get offers from two selected bidders and we have gone back to them for better offers,” Njoroge said during the parliamentary hearing in the capital, Nairobi.

Deposit Payout

Administrators took over management of the lender in October 2015 when its board sought protection after discovering unreported loans, Njoroge said at the time. Two other financiers, Chase Bank Kenya Ltd. and Dubai Bank Kenya Ltd., were also placed in receivership within a span of eight months.

Chase was acquired in January by SBM Holdings Ltd., the second-biggest lender in Mauritius. Imperial’s sale will be similar to that of Chase in that the administrator will isolate the illiquid and high-risk assets, or bad bank, and dispose off the remaining performing assets, or good bank.

The bank’s depositors said they expect to be paid at least 75 percent of their money, according to Azeem Haji, a committee member of the Imperial Bank Depositors Lobby Group.

“Our analysis shows that the good bank can cover 76 percent of deposits,” he said by phone. “They have also been collecting loans.”

Secret Accounts

Imperial was seized less than a month after former Managing Director Abdulmalek Janmohamed died on September 2015. He was among three managers implicated in fraud at the bank, according to a lawsuit filed by the lender at the time.

The alleged malpractice involved Janmohamed “allowing certain customers to overdraw their accounts and concealing the overdrawn amounts using specially created secret accounts and financial reporting software,” George Oraro, a lawyer for the bank, said at the time. The result is that the published financial reports didn’t reflect the true financial position of the bank, he said.

Founded in 1992, Imperial has outlets in Kenya and Uganda, where its operations were placed under statutory management and a 58.6 percent stake was later sold to Exim Bank of Tanzania.

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