NIC Bank and CBA in talks for a possible merger
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.