Kenya’s First Family Owned Bank in Merger Talks

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A bank associated with the Kenya’s first family is engaged in talks with a middle tier bank associated with a possible merger, creating in the process Kenya’s third biggest bank by assets.

Commercial Bank of Africa (CBA) which represents the Kenyatta family’s interest in the banking sector and the NIC Group associated with the family of late Philip Ndegwa, former Governor Central Bank of Kenya (CBK) announced plans to merge.

Saying that they were targeting a “successful  conclusion” of discussions, the lenders said in a paid advertisement that ran Friday in all major dailies, that they were waiting for approval from shareholders drawn from the two banks including from the regulatory regime before sealing of a deal.  

“The boards believe that combining the business of two highly profitable entities would create enhanced capacity through capital consolidation and strong liquidity to capture strategic growth opportunities,” they said in a joint statement.

“It is the view of the two boards that the potential merger would bring together the best in class retail and corporate banks with strong potential for growth in all aspects of banking and wealth management,” they said.

“A combined entity would create a complementary base of over 38 million customers, a strong digital proposition and a robust corporate and asset finance offering, “said the lenders.

The NSE-listed NIC consequently issued a cautionary trading statement following the announcement.

“This transaction, if successfully concluded, may have a material effect on the price of the company’s securities,” it noted. NIC’s stock stood at Sh22.65 per share by close of Thursday, 0.67 per cent, up from the previous day’s Sh 22.50 per share.

“Accordingly, shareholders, bondholders and the investing public are advised to exercise caution when dealing in the company’s securities.”

The two lenders said a successful merger would allow it to “invest in future growth and in new technology to create enhanced offerings and wider services to its customers, as well as deliver deeper financial inclusion while generating attractive returns to shareholders.”

“A combined larger group would provide new and greater opportunities for employee development, advancement and growth,” they said.

“The combined group would be strongly placed to play a bigger and more significant role in the banking sector and the economies of Kenya, the region and beyond.”

Henry Rotich, National Treasury Cabinet Secretary, said that he welcomed the merger talks, saying the move would strengthen the country’s financial sector which would be a bellwether since authorities here capped commercial lending rates in 2016.

Presently, CBA is the seventh biggest bank in the country controlling a 6.05 per cent market share, according to the latest banking sector supervisory report. NIC on its part controls 4.62 per cent. Combined, the two will have a market share of 10.67 per cent.