**Key Facts Summarized:**
– ???? **Co-operative Bank’s Troubled Deal:**
– Advisers handling Co-operative Bank of Kenya’s 2009 acquisition of Jamii Bora Bank faced limitations in conducting full due diligence.
– Regulatory decisions by the Central Bank of Kenya and political influence from senior government members facilitated the ill-fated purchase.
– The scrutiny did not include an assessment of Jamii Bora’s corporate lending portfolio, which later caused significant financial issues.
– The deteriorated corporate loan book of Jamii Bora contributed to a Sh1.5 billion capital shortfall in Co-op Bank.
– ????️ **Impact on Kingdom Bank:**
– The merger of Co-operative Bank and Jamii Bora to create Kingdom Bank might negatively affect its operations.
– Challenges related to scale in the mid-tier banking sector are noted.
– ???? **History of Mergers in Kenyan Banking:**
– The merger trend among smaller Kenyan banks began seven years ago, leading to entities like NCBA and Kingdom Bank.
– ???? **Due Diligence Oversight:**
– The due diligence process was initially intended to encompass all of Jamii Bora but was later restricted.
– KPMG and other institutions responsible for due diligence did not clarify why poor due diligence was overlooked.
– KPMG was not involved in the Jamii Bora bank purchase.
– An ongoing review is being conducted regarding these issues.
– ???? **Financial Motivations and Concerns:**
– Shareholders expressed concerns about the deal’s timing and motivations, citing potential financial gains.
– Co-op Bank officials acknowledged mistakes but denied wrongdoing.
– Questions were raised about structuring fees based on deal success.
– ????️ **Co-op Bank’s Troubles:**
– Co-op Bank faced various accusations, including scandals, nepotism, and customer complaints.
– ???? **Co-op Bank’s IT Challenges:**
– Co-op Bank had a history of IT system weaknesses and disruptions.
– Rumours circulated about IT system supply and tendering by the chairman’s family.
– The bank experienced ATM and card transaction disruptions.
– ???? **Market Share and Liquidity:**
– Co-op Bank, an established entity, held a significant market share, while Jamii Bora struggled with minimal market presence.
– Jamii Bora had liquidity issues with a negative ratio, far below regulatory requirements.
Co-operative Bank’s 2009 acquisition of Jamii Bora Bank faced due diligence limitations, leading to a disastrous purchase. Political influence and regulatory decisions played a role.
The deal lacked proper scrutiny, especially in assessing Jamii Bora’s corporate loans, resulting in a substantial capital deficit.
Concerns arise about Kingdom Bank’s future, formed from this merger. The Kenyan banking sector has witnessed a trend of mergers, with questions about due diligence oversight.
Shareholders questioned motivations, and Co-op Bank grappled with various issues, including IT system weaknesses.
Despite Co-op Bank’s established market presence, Jamii Bora struggled with liquidity problems.