BoT Places Bank M Tanzania Plc under Administration, Confirmed Insolvent


Friday, August 03, 2018     07.05AM / By  Brian NGUGI of BusinessDAILY, Kenya


Tanzania’s banking regulator, the Bank of Tanzania (BoT), on Thursday placed Bank M Tanzania Plc under administration after it became insolvent.


The lender consequently will not open for normal business for up to ninety days effective Thursday “during which the Bank of Tanzania will determine an appropriate resolution option,” the regulator added.


The move is expected to affect the operations of the Kenyan small-sized lender M-Oriental, formerly Oriental Commercial Bank, where the Tanzanian lender owns a 51 per cent stake.


"The decision to take over the bank follows determination by the Bank of Tanzania that Bank M has critical liquidity problems and is unable to meet its maturing obligations," BoT said in a statement.


"Continuation of the bank's operations in the current liquidity condition is detrimental to the interests of depositors and poses systemic risk to the stability of the financial system."


The Tanzanian regulator appointed a statutory manager to run affairs of the bank and suspended its board of directors and management.



First TZ lender in Kenya


Two years ago, Bank M of Tanzania, became the first Tanzanian lender to enter the Kenyan market after 73 per cent of its shareholders under the M Holdings Group agreed to buy 51 per cent stake in the former Oriental Commercial Bank.


This followed a decision by the Central Bank of Kenya (CBK) on June 22, 2016, clearing the acquisition of the stake by the Tanzanian lender, setting the stage for its entry into Kenya.


At the time, Bank M had a deposit base of Sh31.8 billion and a loan book of Sh33.5 billion.


Oriental Commercial Bank, now M-Oriental, had then a deposit base of Sh6.2 billion and a loan book of Sh5.2 billion.


M-Oriental Bank would later that year rebrand to target wealthy family-run businesses in Kenya.


It for instance stopped offering automatic teller machine (ATM) services in the strategic shift.


M Holdings Group chief executive officer Sanjeev Kumar at the time told the Business Daily that the lender would mostly focus on banking large family businesses in a bid to grow its loan book and balance sheet.


“M Oriental Bank is being repositioned as a wholesale bank focused on large family businesses in Kenya offering innovative products and services.


“We will not be offering ATM services,” said Mr Kumar on July 23 during the unveiling of the bank’s new identity in Nairobi.



Niche business model


Mr Kumar added then that M Oriental would seek to replicate its niche business model that had seen the Group’s Tanzanian unit attain success by restricting banking services to high net-worth individuals and family businesses.


“We have created Bank M as a strong wholesale bank in Tanzania and we aspire to transform M Oriental as the preferred bank for large family businesses in Kenya,” he had said.


Prior to acquisition, Oriental Commercial Bank was classified as a small lender by the CBK and was formerly Delphis Bank Ltd.


It had been licensed to operate in Kenya in 1991, and was ranked 37th in terms of market share as at 31 December 2015, with nine branches.


Bank M, ranked among the top 10 banks in Tanzania, is owned by 15 shareholders with Vimal Mehta as its largest shareholder with a 16 per cent share.


Mr Mehta is the chairman of Negus group of companies, which formerly held a controlling stake in Serengeti Breweries. Nine of its shareholders are listed as individuals with the rest as institutions.


The Tanzanian lender was formed in February 2007 and focuses mainly on corporate and investment banking.


Previously, there was no Tanzanian-owned bank operating in Kenya. Seven Kenyan banks operate in Tanzania: Equity, KCB, NIC, CBA, I&M, Bank of Africa and Diamond Trust Bank.


Tanzania has been a difficult market for most of the lenders, denying them brisk profit growth as recorded in other regional markets.


About Author

Brian Ngugi covers financial and economic news for the Business Daily. He holds a Bachelor of Arts degree from the University of Nairobi, where he majored in Political Science and Sociology. He holds a Diploma in Broadcast Journalism from the Kenya Institute of Mass Communication.


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References to Bank M Tanzania

·         Bank M Tanzania plc: Private Company Information - Bloomberg

·         Bank of Tanzania takes over Bank M :: Kenya - The Standard Aug 02, 2018

·         Bank M Tanzania plc.: Home

·         Bank M - Wikipedia



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