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The Central Bank of Kenya (CBK) Monday evening approved the acquisition of 100 percent shareholding of National Bank of Kenya (NBK) by Kenya Commercial Bank Group.
“The approval has been granted in accordance with Section 13(1) (e) of the Banking Act. The acquisition will strengthen both institutions leveraging on their respective well-established domestic and regional corporate, public sector and retail franchises,” said the banking regulator in a statement.
The transaction will be the second major deal among Kenyan lenders since the government capped commercial lending rates in 2016, squeezing their profit margins and forcing them to look for survival strategies, including consolidation.
CBA Group, a privately held bank, is also in the process of merging with NIC Group to form the third-biggest bank by assets in East Africa. There have been other smaller transactions including Diamond Trust Bank’s acquisition of Habib Bank Kenya in 2017.
KCB had last month announced to delist NBK’s shares from the Nairobi bourse before October, with NBK to operate as a stand-alone subsidiary before integrating its operations within about two years of the acquisition.
The combined entity could attain a return on equity of 26.9 per cent in 2023, which had a return on equity of 23 per cent in 2018. KCB is also finalizing the acquisition of 25 billion shillings ($247 million) worth of assets from Imperial Bank, which collapsed in 2015.
The proposed de-listing of NBK is however, subject to approval by NBK shareholders.
KCB has not given a valuation for NBK. The merged entity could have a balance sheet of 1 trillion shillings ($9.90 billion) by the end of 2022.
On 18 April 2019 KCB Group PLC (KCB) gave notice of its intention to acquire 100% of the ordinary shares of National Bank of Kenya Limited (NBK), pursuant to regulation 4(1) of the of The Capital Markets (Take-overs and Mergers) Regulations, 2002.
KCB and NBK have jointly set up a project team comprising of staff from both entities to mitigate transitional risks and make the necessary preparations to enable a smooth transition.
KCB received its shareholders’ approval to proceed with the proposed acquisition of NBK during its AGM held on 30 May 2019.
KCB Group runs subsidiaries in the East African region in Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan. It also has a representative office in Ethiopia. In addition, the Group owns non-banking subsidiaries namely; KCB Insurance Agency, KCB Capital, and KCB Foundation. KCB Group oversees operations of KCB Bank Kenya Limited and all other subsidiaries.
NBK was incorporated in 1968 as a wholly-owned Government entity. The Government of Kenya has over time, reduced its shareholding in NBK.
The bank is listed at the Nairobi Stock Exchange and owns two subsidiaries: NBK Insurance Agency Limited, and Natbank Trustee and Investment Service Limited.