Ladies and gentlemen! I’m your chief flight attendant. On behalf of the Captain and the crew, welcome aboard Consolidation Airways, Airline – KCGC 89-2018 non-stop flight from Nairobi to Kotoka Airport, Accra. Our flight will take the normal time. We will be flying at a few altitudes above sea level. At this time, I plead with you to obey all the flight instructions.
You are reminded that this is a trip of bankers on a mission. Please, I am very serious about this instruction, please, this is no laughing matter. Please, if you know you obtained your visa under false pretences using suspicious bank statements then consider yourself already consolidated before we reach Kotoka. Any suspicious capital in your wallets and bags? The Consolidator-General will not spare you. Enjoy the trip with this “In-flight Digest ” containing a menu from the Kenya Consolidated Bank. Those who have eaten plenty of consolidated food with camels’ meat should prompt me for toilet rolls when their stomachs begin to rumble.
Trip down memory lane, the Consolidated Bank Kenya (CBK) emerged in 1989 from the problem of insolvency which hit nine financial institutions at the time. They were the Jimba Credit Corporation, Union Bank of Kenya, Kenya Savings and Mortgages, Estate Finance Company of Kenya, Estate Building Society, Business Finance Company, Citizen Building Society, Nationwide Finance Company and the Home Savings and Mortgages. Thus, in a bid to stabilise the country’s financial sector, they were consolidated.
The Kenya Government has the majority shareholding of (78%) held on its behalf by the National Treasury. The National Social Security Fund and some other state institutions hold the remaining shares in the bank. At the time of its inauguration, the then Vice President, Mr George Saitoti who also served as the Minister of Finance indicated that “the arrival of the bank was a major step towards the development of Kenya’s banking industry.” The bank operates with the tagline – “We’re better together,” which conveys the consolidation of the nine banks into one.
Indeed, expectations were high regarding the bank’s future fortunes when it started operations and rightly so since customers lost their deposits in the erstwhile banks. But with time, the bank had its own share of troublesome CAMELS to deal with under the supervision of the Central Bank of Kenya.
Turbulence on the flight
Ladies and gentlemen! We are now entering the turbulent zone, those whose stomachs have started rumbling with consolidated diarrhoea should pick the toilet-rolls. Alright! Years later, the Consolidated bank started registering high non-performing loans culminating in severe losses. For instance, the bank’s audited financial statement in Kenyan Shillings (millions) as at 31 December 2017 revealed a total comprehensive loss of (2017: Sh 334,639.000) and (2016: Sh’ 212,142.000).
Indeed, a report of the Public Investments Committee (PIC) of Kenya’s parliament on the bank’s activities revealed that. the bank was committing the very sin from which it was born. Thus, a child from the uterus of consolidated sinners. “The bank advanced a loan amount which exceeded single obligor limits of more than 25% of its core capital to Mastermind Tobacco, cigarette manufacturer at a time it was in dire need of a capital injection.” The Committee also disclosed that “failure by the shareholders to inject new capital into the bank may put the bank’s operations in jeopardy.”
As if that was not enough, the Office of the Auditor General of Kenya in its audit opinion on the bank’s financial statement as at 31 December 2016, confirmed that “the bank had a total regulatory /risk capital weighted asset ratio of 8.0% (2015:9.40%) against the regulatory minimum of 14.5%. The bank, therefore, had not met the minimum regulatory capital requirements… necessary for the renewal of its 2015 banking licence by the CBK.” Turbulence!
Based on the challenges which confront the bank, it is currently being privatised to allow strategic investors to own and improve its performance.
Landing at Kotoka
Ladies and gentlemen! Please, remain in your seats and fasten your seat belts. We value your safety and comfort. The Banking Flight KCGC 89-2018 is about landing at Kotoka – Airport City, the Consolidated Bank, Ghana’s lodge. As you all know, the Consolidated Bank, Ghana was established from the union of five liquidated banks -Beige, Construction, Royal, Sovereign and the uniBank. The reasons for its formation are similar to the Kenyan experience with the present ownership vested in government’s hands.
Interestingly, a cursory look at the logo of the Consolidated Bank, Ghana shows the adinkra symbol “Nkon son” (chain link) signifying “human relations and unity” with the hands holding each other around it. This has a striking semblance in meaning with the Consolidated Bank, Kenya’s tagline- “We’re better together”. The connected fact is that the Consolidated Bank, Kenya and the Consolidated Bank, Ghana emerged to unite individual banks which were insolvent in Kenya (1989) at one side and Ghana (2018) at the other side. I call this the “KCGC 89-2018”. This is the history of the consolidated flight on which you are travelling.
Meanwhile, at the time the CBG was announced, the Governor, Dr Ernest Addison said, “Ghana needs a strong and stable banking sector to drive the process of economic transformation.” This statement resonated with the passing comments of the then Vice President cum Finance Minister, Mr George Saitoti when he launched Consolidated Bank Kenya in 1989 (29 years ago). So, how does the future look for Consolidated Bank, Ghana? Will it suffer the same fate as its Kenyan counterpart still struggling to stand on its feet?
It is worthy to repeat the fact that the banking business revolves around the CAMELS anatomy (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, Sensitivity/ Solvency). Therefore, the lessons from the Consolidated Bank, Kenya’s trajectory should reaffirm the fact that banks’ fortunes and sustenance or otherwise depend on how well or badly the banking animal- CAMELS’ sensitive parts are managed within the regulatory framework, whether they are consolidated or not consolidated. Kaput!
Okay! Do you still remember the chimpanzee credit officer in the “bankingtainment”? Before it made the U-Turn to the zoo, look at this credit paper it left behind on a loyal customer: Character (he gives me plenty-plenty banana), Ability (20 years in providing plenty-plenty banana ) , Margin of interest (100% on plenty-plenty banana ), Purpose (plenty-plenty banana plantation), Amount (total value of plenty-plenty banana ) Repayment (till thy kingdom come), Collateral (plenty-plenty banana). As for this chimpanzee, everything is a plenty-plenty banana.
On behalf of the captain and the crew, I thank you for boarding Banking flight KCGC 89-2018. Have a nice time! God Bless You
The writer is a Chartered Banker