NAIROBI, KENYA, DEC 7— The Kenyan banking industry is poised for a major shakeup if the ongoing merger talks between the Commercial Bank of Africa (CBA) and the NIC Group come to fruition.
The two have made public of ongoing talks which could lead to one of the biggest mergers in the country’s banking industry history, shaking up the tier one list enjoyed by lenders with large assets and huge customer base.
CBA has a large influence of Kenya’s President Uhuru Kenyatta’s family, while NIC is heavily inclined towards the former Central Bank of Kenya (CBK) governor Philip Ndegwa- a Kenyan economist, entrepreneur and patriarch of one of Kenya’s wealthiest families.
“Shareholders and bondholders of NIC Group PLC and the investing public are advised that the Company’s Board of Directors have authorized the commencement of discussions with Commercial Bank of Africa Limited, which could lead to the eventual merger of NIC Group PLC and Commercial Bank of Africa Limited,” the lenders said in a joint statement.
“Upon conclusion of these discussions and subject to approvals from shareholders of the two entities and regulatory authorities, it is expected that the merger will create one of the largest financial services group in the region,” said chairpersons James Ndegwa (NIC) and Destario Oyatsi(CBA).
If a transaction does materialise from these discussions, it will be subject to board, shareholder and all applicable regulatory approvals.
NIC Bank which is listed on the Nairobi Securities Exchange (NSE) has already recorded a swing on its shares which surged 32 per cent on Friday, a day after the announcement, to trade at Ksh30 shillings ($0.29).
“This transaction, if successfully concluded, may have a material effect on the price of the Company’s securities. Accordingly, shareholders, bondholders and the investing public are advised to exercise caution when dealing in the Company’s securities,” the lenders announced in a public notice through the NSE.
A merger of the two is expected to form the third-largest lender by assets, shaking up the Tier 1 platform which is currently being enjoyed by the likes of KCB Group , Equity Group and the Co-operative Bank of Kenya.
It will push the new entity’s total assets to the tune of Ksh444 billion displacing Co-operative Bank of Kenya from the third position on the Tier 1 platform.
The top two lenders in the category are KCB and Equity which enjoy an asset base of about Ksh684 billion and Ksh560 billion respectively.
Consolidation will also place the new institution at a more competitive position to compete with major continental lenders such as those in the Western Africa market.
They include Nigeria’s biggest lender by market value-Guaranty Trust Bank and United Bank for Africa Plc which is among the largest lenders by revenue. They two have made significant advances in the East African market.
A stronger bank from the merger of NIC and CBA will increase their capacity in the region where they have operations in Tanzania, Kenya and Uganda.
This 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.
CBA which has an ambitious continental expansion plan of operating in more than 15 countries has recorded rapid growth on its retail customer base, buoyed by the M-Shwari platform.
A combined entity would create a complimentary base of over 38 million customers, a strong digital proposition and a robust corporate and asset finance offering.
Such a group would be better placed to seize the emerging opportunities in Kenya and the region.
The bank’s boards believe that the combined business of the two would create
enhanced capacity through capital consolidation and strong liquidity to capture strategic growth opportunities.
“It is the view of the two boards that a 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,” the lenders said.