Details are emerging that the Kenya Commercial Bank Group’s expansion ambition is the driving force behind its merger with the National Bank of Kenya (NBK).
KCB is acquiring 100 per cent stake in NBK.
The acquisition, it was announced will be done through an 1:10 ordinary share-swap to end in a 100percent control of the lender.
The Nairobi Securities Exchange (NSE) listed bank has since obtained approval from its board and has since submitted the offer to NBK for consideration.
Commenting on the disclosure, KCB Chief Executive Officer Joshua Oigara says the offer sits within the group’s expansion strategy solidifying its already firm position in East Africa’s financial sector.
“The planned acquisition would accelerate the group’s growth ambitions and enhance value to shareholders as it would bring in more assets and scale. It presents an opportunity for more consolidation in Kenya’s banking industry,” he said.
The bank, which has a presence in seven of the regional countries further plans on de-listing National Bank from the NSE bourse upon the receipt of 75 per cent of the lender’s total shareholding.
KCB sits at the summit of Kenyan tier one lender having a greater asset value than its closest competitor while National Bank, which is majority-owned by the National Social Security Fund (NSSF) sits at the bottom of the tier one pile.
KCB saw its 2018 profits rise by 22 per cent to Ksh.24 billion while NBK’s earnings dipped by a staggering 98 per cent over the same period.
The acquisition offer backs experts’ expectations for ongoing consolidation in Kenya’s banking sector which currently has over 40 different players under the regulation of the Central Bank of Kenya (CBK).
The acquisition is largely tipped to see larger banks acquire their smaller counterparts as the big boys in banking seek to maintain a competitive edge and fast-track their growth.
“Increased consolidation in the sector should see the formation of banks that have an adequate capital base, which will provide them with the requisite cover to partake in core banking activities, thereby catalysing economic growth and development in the country,” noted Cytonn Investments in a note on the banking sector published earlier this year.