Mauritius fund pays Sh728m for Credit Bank stake
Credit Bank is grappling with a surge in gross Non-Performing Loans.
What you need to know:
- Shorecap III Limited completed the deal in June 2023.
- Lender grappling with a surge in gross Non-Performing Loans.
Mauritian-based private equity fund last year paid Sh728 million for a 20 percent stake in Credit Bank, valuing the lender at Sh3.64 billion.
Shorecap III Limited completed the deal in June 2023, with the two parties keeping the value of the deal undisclosed at that time.
Credit Bank has now disclosed the value in the latest annual report, saying the money helped lift it from a regulatory capital breach.
“The bank is now compliant with the minimum regulatory capital ratios compared to a non-compliance in prior year,” says the lender in the latest annual report.
The Sh3.64 billion valuation was slightly above the lender’s book value of Sh3.33 billion at the end of March 2023, which was a month before the Central Bank of Kenya (CBK) gave nod to the deal on April 24, 2023.
Credit Bank posted a net profit of Sh13.36 million in the first three months of trading ended March 2024, translating to a near doubling in net earnings from Sh7.03 million in a similar preceding quarter.
The lender is however grappling with a surge in gross Non-Performing Loans (NPLs), which hit Sh10 billion on a net loan book of Sh19.39 billion at the end of March this year, compared to Sh5.98 billion on a loan book of Sh17.91 billion in March 2023.
Aggressive sale of the collateral
Credit Bank has classified the surging NPLs as a pertinent area that will need “special attention from our teams” to sustain the current profit momentum into the medium term.
NPLs had increased by Sh4.1 billion to Sh8.9 billion at the end of December last year, putting the bank’s NPL ratio at 43.8 percent at the end of the year from 29.8 percent posted at the close of December 2022.
“The bank continues to make progress in the recovery of NPLs and concerted efforts have been deployed to realise the same,” said the lender.
The lender adds that it has made some progress in the resolution of NPLs linked to litigation and stalled projects by pursuing aggressive sale of the collateral.
The banking industry is grappling with a rise in loan defaults, with NPLs ratio having hit 15.5 percent at the end of February to set a new record from levels that had been seen in mid-2006.
Credit Bank was licensed by the Central Bank of Kenya as a non-financial institution in 1986 under the name Credit Kenya Limited and converted to a fully-fledged commercial bank in 1995.
The lender has 17 branches across the country and mainly serves small corporates and micro, small and medium-sized enterprises.
