Friday, March 29, 2024

James Mworia: Why we sold Sidian Bank to Nigerians at a loss

In June 2022, Centum Investments announced the sale of Sidian Bank to Nigeria’s Access Bank. The bank was sold at a loss.

The sale was estimated to be worth Sh. 4.3 billion which is less than the amount that Centum Investments has put into the mid-tier lender.

“We initially bought the bank at Sh. 2.7 billion and subsequently put in capital that brought our investments to Sh. 4.7 billion.”

“However, every year we re-valued the bank and at the point of sale we were carrying it at Sh. 2.5 billion having provided for revaluation losses through our books,” Centum chief executive officer James Mworia said.

Sidian Bank was sold to Access Bank, which is the same lender that bought Transnational Bank two years ago.

According to Mworia, the sale became necessary in the wake of unsuccessful attempts to revitalize Sidian and give it stable capital ratios.

Sidian Bank was formally known as K-Rep Bank. It rebranded in April 2016 in a restructuring process that cost Sh. 500 million.

The bank was acquired by Centum Investments in December 2014 after Centum bought a controlling stake.

How educated is George Wajackoyah? See his education profile here

Centum Investment acquired an additional 66 percent shareholding in K-Rep Bank Limited from several existing shareholders to bring its total stake in K-Rep to 67.54 percent in 2014.

Centum injected Sh. 1.2 billion capital out of the required Sh. 1.6 billion to turn around the bank. At the time of acquisition, Sidian had a customer base of 300,000 people.

Centum then progressively increased shareholding in Sidian through capital injections by investing Sh.4.7 billion in the bank.

How educated is Joseph Mucheru? Here’s his education profile

The rain started beating Sidian Bank after the collapse of Imperial and Chase Banks when the Central Bank of Kenya introduced stricter liquidity requirements.

Mworia said that Centum was faced with three main decisions; get a strategic buyer with an established bank network who would need lesser resources to scale, invest Sh. 800 million annually for three years and retain all profits at the bank to raise Sh. 10 billion capital, or to continue operating the lender as is.

“We said is if we can get a price at the upper end of the market then we are happy to exit. So we exited at 1.1 price-to-book, at the higher end of the market. Then that other investor now can come and now leverage their synergies and move the institution to the next level,” said Mworia.

James Mworia went on to disclose that apart from heavy capital ratios, the introduction of an interest rate cap in the banking sector had meant that Sidian could not comfortably lend to its core market which is mainly made up of small businesses and individuals. This is because this segment was deemed as risky.

Connect With Us

320,546FansLike
14,108FollowersFollow
8,436FollowersFollow
1,880SubscribersSubscribe

Latest Stories

Related Stories