Turnaround Strategies Influencing Recovery of Commercial Banks Under Receivership Programme in Kenya: a Case of Chase Bank

Abstract

Organizations falling under receivership programmes have been prevalent in Kenya as a strategic tool for financially distressed companies. Ailing financial institutions are placed under CBK statutory management in the hope to restore them back to profitability and facilitate total debt recovery. However this has not happened and almost all those cases result into liquidation. This study seeks to establish the turnaround strategy that Chase bank recently was put under receivership programme have put in place to recover from the financial distress with a special focus on how turnaround leadership, stakeholder management, portfolio divestment and retrenchment strategies can be adopted by such institutions to turn them around to profitability. To achieve this, the study is pinned on stakeholder theory, resource munificence theory and causality of the distress theory to understand the strategies employed by chase bank to recover from her financial distress. The study has adopted a descriptive research design where the respondents are required to indicate the what, where and how of a phenomenon under study. The study samples 123 management staff working in the head offices of Chase Bank in Nairobi and branches within Nairobi County in Human resources, Forensics, IT, Security, internal audit, Risk and digital banking departments. Simple random sampling will be used to select the respondents from each stratum (senior managers, middle level managers and low level managers). Data collection involves the use of questionnaires. The items in the instrument are assigned codes which are then be entered into SPSS version 20 where they are analyzed. Quantitative descriptive methods will be used to analyze the collected data. In the analysis process, data is leveraged using descriptive statistics including measures of central tendencies that is measures of central tendency and the percentages where figures and tables are used to represent the data. The study sought to establish the turnaround strategies that influence the recovery of commercial banks under receivership programme in Kenya with referenceto Chase Bank. The study found that turnaround leadership such change of other senior management, the way of doing business and interaction with junior staff has made the recovery of the bank possible. The study also found that the engagement of stakeholders in key decisions during recovery process eases the recovery process as it reduces the level of resistance and opposition to the implementation of turnaround strategies from stakeholder’s hence successful implementation of turnaround strategies. The bank has divested in non-profit generating assets to stop cash drain and in non-core assets/profitable assets to generate more cash to salvage financial distress and restructuring. The study further found that layoffs in the bank; closure of some branches and business units, reduction in short term assets such as debtors and selling of some business units has enabled the bank to reduce its operating costs. The study recommends that commercial banks under receivership programmes should pursue turnaround strategies to do so in cognizance of the factors that influence such strategies especially leadership, retrenchment, portfolio divestment and stakeholder management to recover to their initial financial feet.