Banking System: Is Kenya's more corrupt or just more honest?

Dear Africa interested individuals:

                                                                Over the past one year under the leadership of Patrick Njoroge, three Kenya banks have gone into receivership and the National Bank of Kenya has had its CEO & CFO removed along with four others.  A net profit of 2.25B Ks by September 2015 turned into a net loss of 1.15B Ks by December 2015 for National Bank of Kenya.  Patrick Njoroge, has stated that " never again will fuzzy numbers and creative accounting be used to deceive investors in banks."  The system is rotten and he has decided to openly acknowledge it and resolved to clean up the system.  Kenya is in tune with the rot within its banking system and is putting in place a better structure and closer surveillance and reporting to restore investor confidence in its banking system.

Let's take a five hour flight to Nigeria, the most visible frontier market in Africa.  Skye Bank reported a pretax profit of N14.98B as at September 30, 2015.  As at December 31, 2015, Skye Bank reported a net loss of N40.7B.  Key members of the board including the Chairman were forced out and the Central Bank of Nigeria appointed new board members including a new CEO  and Chairman.  The bank also received a lifeline in excess of N100B to enable the bank remain a going concern and meet its obligations to depositors.  The bank was also the only major bank not selected for foreign exchange dealing in the free float market.

I actually, raised eyebrows at the H1 2015 point about Skye Bank when discussing why Nigerian banks will keep telling less. Despite the above disturbing event and bailout, we have heard the following:

1. The CBN says Skye Bank is neither distressed nor liquidated and remains a healthy bank in the Nigerian banking system. All banks in Nigeria are safe and investors have no cause to fear.

2. The new CBN appointed Chairman of Skye Bank: M.K. Ahmad said that the CBN has not taken over the bank, but just reconstituted the board.  This also means that the bank is not under receivership.  This is not true as once a certain power asks certain individuals to manage a bank by executive fiat, that bank is under receivership.  The board was reconstituted by the CBN and the new board members are on the board purely based on authority from the CBN and you still want to tell the whole world that Skye Bank has not been taken over by the CBN.  The CBN just intervened.  There is a book called how to use statistics and lie.  We need a new one called how to use semantics and lie.

African Bank Investments Ltd. gave a profit warning two years ago and said it needed $792m to remain afloat. This is from the management of the bank. Corporate governance laxity was at the heart of African bank's collapse.  An independent investigation by a lawyer was undertaken to look into the collapse and the findings recently publicly released.  

Skye Bank gave a profit warning earlier this year but did not acknowledge needing emergency funds to remain afloat.  A few months later, the CBN intervenes with in excess of $300m and still says the bank is not in distress and of course the new management went along with the same mantra gleeefully.  The bank only had corporate governance issues according to the CBN.  "I laugh in Swahili."

Kenya does not have a more corrupt banking system; Kenya has a more honest bankint system where the system is more important than individuals. Kudos to Patrick Njoroge for bringing VALUES back into business.  The elevation of individuals and self preservation is the bane of Nigeria's banking existence. Kenya has a banking crisis and is working to plug the loopholes while Nigeria remains in denial as Godwin Emefiele and his cohorts try to preserve their legacy by defending the indefensible.

Kenya and South Africa's banking systems are corrupt and both are assiduously working on correcting issues that have come to the fore.  A private investigator looked into the collapse of ABILITY in South Africa and how this can be avoided going forward.  Kenya is also ringing in massive changes to business as usual in its banking industry.  Nigeria continues to say all is well while grappling behind the scenes with fires burning left and right.  I will take the former over the latter any day.  I see hope for the former and darker days for the latter.  W

When reality decides to bite, it will bite really hard.  

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