NBK put to task over reluctance to honour audit requests

Monday May 20 2019

NBK

The National Bank of Kenya (NBK). FILE PHOTO | NATION MEDIA GROUP 

DAVID MWERE
By DAVID MWERE
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The National Assembly wants the National Bank of Kenya (NBK) management to explain why it has been reluctant to submit its financial statements to the Office of Auditor General.  

The MPs now fear there could be a syndicate to conceal malpractices. 

A letter from the Office of the Clerk to the National Assembly addressed to the bank’s Managing Director Wilfred Musau, wants an explanation why the bank has declined numerous audit requests from Auditor-General Edward Ouko.

INVESTIGATIONS

This comes as the House committee on Finance and National Planning commences investigations into the NBK’s Sh6.1 billion controversial takeover by Kenya Commercial Bank (KCB).

In its 19th report of audited accounts of state corporations, the Public Investments Committee (PIC) observed that NBK was not being audited by the office of auditor general.

“This is despite the government of Kenya and the NSSF having joint shareholding in the bank of more than 50 per cent. The committee has since learnt that efforts by the auditor general to audit NBK has been futile,” the letter signed by Senior Deputy Clerk Jeremiah Ndombi, reads in part.

The letter is copied to Mr Ouko, National Treasury Principal Secretary Kamau Thugge and Acting Inspector General- Inspectorate of State Corporations Mr Titus Muriithi.

TAKEOVER

Consequently, the Office of the Clerk has directed that the NBK management appears before PIC, chaired by Mvita MP Abdulswamad Sharif without fail.

Mr Musau is required to avail to the Office of the Clerk, 25 hard copies and a soft copy of responses not less than three days before his appearance for perusal. The same is also required to be submitted to the office of auditor general.

Early this month, Nyatike MP Tom Odege petitioned the House to investigate NBK’s takeover to establish whether it was subjected to public participation as required and not boardroom dealings between the two banks.

House Speaker Justin Muturi directed that the committee on Finance, chaired by Kipkelion East MP Joseph Limo, to investigate the matter and produce a report in 60 days.

VALUATION

While KCB stands to gain 100 per cent shareholding of NBK in this deal, the fate of small shareholders, mainly Kenyan workers seems unclear- not properly safeguarded.

According to Mr Odege, it is important to establish whether the interests of pensioners and taxpayers have been safeguarded.

But even as MPs investigate the matter, approvals by regulatory authorities- Capital Markets Authority (CMA), Central Bank of Kenya (CBK), and Competition Authority of Kenya (CAK) stand in the way of the of the takeover. 

CMA Act requires that an independent advisor carry out an independent valuation of NBK to be included in shareholders circular for approval. However, there is no indication this was done.

 If the takeover is actualised, KCB will largely benefit from NBK’s Sh100 billion in customer deposits and huge value in property assets and its infrastructure across the country.

It will also mean that the National Treasury has made a decision on its 1.135 billion preferential shares it holds in NBK jointly with NSSF, a decision the two shareholders were unable to resolve when the bank proposed a Sh10 billion rights issue in 2013.

SHARES

It should also be noted that after converting the preference shares to ordinary shares, NSSF and Treasury will then have a combined ownership of 93 percent of NBK.

This makes it easy to delist and force minority shareholders out without requiring their approval.

According to the statement by KCB, the acquisition would be by share swap of 10 ordinary NBK shares for one ordinary KCB share.

“The offer shares will be acquired free from charges, encumbrances and other interests and together with all rights now and thereafter attaching thereto including the right to receive all dividends and other distributions made or paid,” KCB Group Company Secretary, Mr Joseph Kania said previously.

The inevitable issue of job losses at the time when the economy is limping needs to be addressed.

For instance, is it worth putting the careers of over 1000 NBK staff on the line to rescue the bank when other options exist?