Kenyan lender disowns Bank M

Dar es Salaam. Kenyan lender M Oriental Bank has distanced itself from Tanzania’s troubled Bank M.

M Oriental said in an advertisement published in the latest edition of The EastAfrican that the lender does not have any association with Bank M Tanzania, whether direct or through any interbank lending.

Read more: Kenyan bank affiliated to Bank M reassures its clients

“Kindly take note that Bank M Tanzania neither has shares in M Oriental Bank nor M Holdings Ltd,” said the statement, which was released following suggestions in a section of the Kenyan press that last week’s decision by the Bank of Tanzania (BoT) to take over administration of Bank M could affect operations of M Oriental.

“The correct position is that the Central Bank of Kenya (CBK) gave an approval to M Holdings Ltd, a Kenyan owned and registered company in 2016, to acquire up to 51 per cent of M Oriental Bank. Though, they subsequently opted to only acquire 33.8 per cent,” the statement added.

BoT said last Thursday that the decision to take over management of Bank M by suspending its board of directors and management and appointing a statutory manager was prompted by serious liquidity problems the lender was facing.

“Continuation of the bank’s operations in the current liquidity conditions is detrimental to the interests of depositors and poses systematic risk to the stability of the financial system,” the central bank said.

The management takeover means that Bank M will not open for business for 90 days.

Bank M has been a profitable entity for nine of the 11 years that it has operated in the country. As a corporate and investment bank, Bank M has been largely involved in the issuance of loans to large companies, while mobilising deposits from both individuals and corporate entities alike.

The business model paid off and the bank, which received its commercial banking licence from BoT in February 2007 before opening for business in July of the same year, made a loss only during the first two years of its operations.

During its first year of operations (in 2007), the lender had total assets worth Sh31.2 billion. It recorded a loss of Sh1.56 billion, largely due to start-up costs.

In its second year of operations (2008), Bank M’s assets more than doubled to Sh67.3 billion and the loss was cut to Sh1.3 billion. It 2009, it registered its maiden profit of Sh522 million and assets rose to Sh106.5 billion.

By the end of 2016, the bank’s assets had reached Sh1.05 trillion while its annual net profits ballooned to Sh16.6 billion. But in an unexpected turn of events, profits began to fall.

During the year ending December 2017, Bank M’s profit declined to Sh12.14 billion. Its net profit plunged to a measly Sh1.3 billion during the first half of 2018, from Sh8.5 billion during a similar period in 2017.