Mauritian bank group SBM Holdings will acquire full ownership of Kenya’s Fidelity Bank, a small lender, in a deal valued at sh 1.2 billion.
SBM entered Kenya in May 2017 by acquiring Fidelity Bank at Sh100 cash consideration, followed by Sh2 billion ($20 million) capital injection in the bank.
It followed it up with August 18 last year’s deal that saw it acquire a majority of Chase Bank assets at a cash consideration of Sh471,335. The group then committed an additional recapitalization of $60 million (Sh6 billion).
SBM booked a bargain purchase gain of Sh3.82 billion in the Chase Bank deal, meaning that it got the assets at a cost that is less than what the same assets could have fetched when sold at open market.
The acquisition is in line with SBMH’s regional expansion strategy into East Africa,” SBM said in the filing.
The firm said in its annual report for 2018 that the decision was taken because the unit is yet to become profitable.
“In May 2017, the goodwill which arose on the acquisition of SBM Bank (Kenya) Limited was MUR 418 million (Sh1.21 billion). The subsidiary is operating at a loss since the acquisition,” said the lender.
“Management determined that there are indicators that the recoverable amount of the cash generating unit (CGU) to which goodwill is assigned might have been less than its carrying amount.”
BM Group, which operates one of the Indian Ocean island nation’s leading commercial banks, SBM Bank, had assets of $4.2 billion as of September. It also operates in India and Madagascar.
Analysts say rising bad debts, the capping of commercial lending rates and weaknesses in corporate governance exposed by the collapse of two lenders in the past year and a half, have made the Kenyan banking sector ripe for consolidation.