NIC Bank and CBA in talks for a pos­si­ble merger

The East African - - NEWS -

By JAMES ANYANZWA

TWO RE­GIONAL banks, NIC Bank and Com­mer­cial Bank of Africa, have opened dis­cus­sions on a po­ten­tial merger which would pro­duce Kenya's third-largest bank by as­sets.

The merger, which is still sub­ject to share­holder and reg­u­la­tory ap­provals, is ex­pected to give the new bank a plat­form to ex­plore re­gional op­por­tu­ni­ties, which KCB and Eq­uity Bank are en­joy­ing. NIC Bank has op­er­a­tions in Uganda and Tan­za­nia while CBA en­tered the Rwan­dan mar­ket through the ac­qui­si­tion of Rwan­dan sub­sidiary of Uganda's Crane Bank this year.

CBA is also tar­get­ing to ex­pand to other mar­kets such as Mozam­bique, DRC and Ethiopia through an on­line pres­ence.

The new en­tity is ex­pected to con­trol an es­ti­mated $4.44 bil­lion in as­sets and over 38 mil­lion cus­tomers, over­tak­ing Co-oper­a­tive Bank of Kenya, which will slide into the fourth po­si­tion.

“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 two banks said in a joint state­ment on Thurs­day.

The pro­posed bank is ex­pected to have a strong dig­i­tal propo­si­tion and a ro­bust cor­po­rate and as­set fi­nance of­fer­ing.

“Such a group will be bet­ter placed to seize the emerg­ing op­por­tu­ni­ties in Kenya and the re­gion,” ac­cord­ing to the joint state­ment.

The even­tual merger, how­ever, re­mains sub­ject to due dili­gence, and share­hold­ers' and reg­u­la­tory ap­provals. Dur­ing this phase of dis­cus­sions, the two banks will con­tinue to op­er­ate in­de­pen­dently. Kenya is look­ing for strong banks that can with­stand shocks and fi­nanc­ing large in­fra­struc­ture projects. The Cen­tral Bank has been en­gag­ing sev­eral lenders in merg­ers and ac­qui­si­tion talks. Kenya has 42 banks, in­clud­ing those un­der liq­ui­da­tion and re­ceiver­ship. Data from CBK shows that 20 small lenders con­trol a pal­try 8.7 per cent of the bank­ing busi­ness com­pared with eight big banks that con­trol 65 per cent of the bank­ing busi­ness and 11 medium-sized banks with 25 per cent of the mar­ket share.

An at­tempt by the Na­tional Trea­sury to strengthen the bank­ing sec­tor through in­creased cap­i­tal­i­sa­tion from Ksh1 bil­lion ($10 mil­lion) to Ksh5 bil­lion ($50 mil­lion) was re­jected by both Cen­tral Bank and par­lia­men­tar­i­ans on grounds that the pol­icy would kill com­pe­ti­tion and hin­der new en­trants into the bank­ing busi­ness.

A merger be­tween NIC and Com­mer­cial Bank of Africa will cre­ate a new plat­form to ex­plore re­gional op­por­tu­ni­ties.

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