Is Housing Finance Group Among Big Boys Eyeing Stake in Chase Bank?

Housing Finance Group could be among local opportunistic lenders interested in acquiring a stake at troubled Chase Bank. Given its recent rebranding that gave birth to HFC, its full banking services subsidiary, HF could join the list of interested investors including KCB, Equity and Centum-owned Sidian Bank, formerly K-Rep.

Chase Bank Kenya is becoming a choice investment for many within the banking sector in Kenya for many reasons.

Indeed, Chase Bank is undergoing uncertain times – a contrast to when it was founded in 1995 at the boom of economic progress in the Kenyan economy. That year, according to the Kenya National Bureau of statistics, the Economy experienced a growth rate of 4.9 per cent compared to a 3.0 per cent in 1994.

Cytonn Investments in their “Kenya Listed Commercial Banks Analysis FY’2015 Banking Sector Report “A Sector In Volatile Transition” project 5.8 percent economic growth due to a conducive and stable macroeconomic environment and tea exports improving for the year.

That aside, Central Bank of Kenya on April 6 placed Chase Bank under receivership, a day after the bank’s chairman (Zafrullah Khan) and group managing director (Duncan Kabui) resigned following the statements of its 2015 financial statements with a qualified opinion by auditors.

Placing the bank under receivership has made many investors to be in distress as they cannot access their monies until the Kenya Deposit Insurance Corporation (KDIC) that was appointed to be its receiver restructurers its debt and improves its operations so it is again able to meet its obligations.

Since then, a lot continues to be done to ensure the bank reopens. On Monday, Central Bank begun to provide liquidity to domestic lenders facing constraints after a run by depositors attributed to the placement of Chase Bank Limited under receivership.

Further, CBK’s Governor Patrick Njoroge noted that the main objective is to reopen Chase Bank as soon as possible, amid talks with shareholders as well as “interested parties and with suitors.

Domestic and foreign lenders have expressed an interest in the bank, he said, without providing further details.

Locally, Equity Group Holdings Ltd., KCB Group, and Centum Investments Ltd. are among companies interested in taking over the Chase Bank, according to report from The Business Daily. These banks have been in operations for long but have not succeeded in tapping into the youth and SME banking as effectively as Chase Bank did. Such realities therefore would present new entrants like HF Group with the opportunity to offer their services and products to the market.

On the other hand, Chase Bank Kenya Ltd. shareholders are committed to recapitalizing the lender. Its shareholders include Amethis Finance, a Paris-based company focused on investing debt and equity in Africa, Respons Ability Participations AG, a Swiss investment company known as rAP, and KfW, the German development-finance group.

Why the interest on Chase Bank?

2005, Chase Bank embarked on a strategy to grow the emerging Small and Micro enterprise (SME) economy of Kenya. Every one of these big banks has an interest in fast-growing SMEs market, including HF.

Besides, the bank has in its twenty years of existence, become a darling and a favorite to great initiatives. It partnered with African Medical and Research Foundation (AMREF) to reduce maternal mortality by training 15,000 midwives in Africa and also its corroboration with Zanaa Africa to distribute sanitary pads to schools in 2012. It’s partnered with Amiran to provide agri-SMEs.

It is only Chase Bank that allowed those saving with it to earn up to 12 per cent interest with as little as KES 2000 and borrow up to 90percent of their savings.

All these, ‘In order to reach our vision of being the Pan African Relationship Bank, we have set our mission as enabling people achieve the things that matter to them most’ Chase Bank attracted Kenya’s youthful population who mainly had SME business.

The bank caters for: Youth, Women, Diaspora, Professionals, Business People, Chama, and those with Savings Plan; a feat that all the other banks in the sector were envious of. Currently HFC offers loans of up to five times the women Chama savings, making that product highly popular among women groups.

“Today I want to give a shout out from the heart. This #relationshipbank proved themselves today in the form of a gentleman called Ian Kimani who worked tirelessly to cover me, where a client left me naked. I am truly grateful #happycustomer #celebratingexemplaryservice. #Chase bank,” said Amani Maranga on 12th February, 2016.

The bank prides itself in its award winning mobile application – Mfukoni- designed to enable its customers to meet their financial needs and access the bank account in a more convenient and efficient way.

In short, Chase Bank has invested a lot of time and money into creating a great technological experience for its customers. Its website is intuitive and easy to use, and so is its mobile site.

What next?

Before being placed under statutory management, the bank had launched a Mobile to Bank toolkit in partnership with Safaricom to simplify payment options for its clients, it had secured Kshs 5 billion (USD 50 million) on-lending facility from the African Development Bank (AfDB) to support its growth strategy, and it was wooing its customers to apply for a cash covered credit card with your Origin Savings Plan or your Fixed Deposit.

This justifies that, its growth strategy was solid and that domestic and foreign lenders are being “opportunistic” with an appetite to tap into its youthful, SME clientele and its enthusiastic employees who made it be recognized and awarded as the Best Company To Work For in Kenya by Deloitte in 2015 out of 43 banks in Kenya.

What if, the bank’s shareholders recapitalize it leaving no room for those eyeing it? With recapitalization, the shareholders will assure depositors their savings are safe – preventing a bank run.

Why was there no interest by the domestic and foreign lenders to buy Imperial Bank and Dubai Bank? The answers are simple – no lender would want to be associates with them. For instance, CBK said Dubai bank, “Has been experiencing serious liquidity and capital deficiencies which have raised the CBK’s concerns that it will most likely not be able to meet its financial obligations as and when they fall due.”

Two, CBK on Imperial Banks said,”…has become aware of unsafe or unsound business conditions at Imperial Bank Limited.”

What is the catch?

Chase Bank is poised for resurgence.

Who will be taking it to that level? One, HF Group which is valued at Ksh71billion, and has been making profits of billions of shillings over the last nine years? The bank according to Cytonn Investments, is the market leader in provision of mortgage financing and fairly valued with high potential returns. HF Group through its banking services subsidiary HFC has recently launched an aggressive countrywide expansion plan eyeing the youth and SMEs. In December, CBK rated HF with one of the lowest interest rates.

Two, KCB Group, Kenya’s biggest lender by assets and which has a strong growth in alternative channels including mobile banking and agency banking to enhance digital payments and more efficient delivery of service?

Three, Equity Group, currently the largest insurance intermediary and the second largest Stockbroker in the country with a market share of 16percent? Or; Centum Investments Ltd., Commercial Bank of Africa Ltd. and I&M Holdings Ltd?