KCB, which also operates in Uganda, Tanzania, Rwanda, Burundi and South Sudan, last month offered to buy National Bank (NBK) through a share swap of one KCB share for every 10 of NBK, joining a wave of consolidation in Kenya’s banking industry.
The group expected to delist NBK’s shares from the Nairobi bourse before October, adding it would run the bank as a stand-alone subsidiary before integrating its operations within about two years of the acquisition.
Sources familiar with the negotiations before the proposed transaction was announced cast the offer as a rescue deal aimed at pulling NBK out of its perennial low liquidity troubles.
The combined entity could attain a return on equity of 26.9 per cent in 2023 said KCB, which had a return on equity of 23 per cent last year.
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 is also finalising the acquisition of 25 billion shillings ($247 million) worth of assets from Imperial Bank, which collapsed in 2015.
It said the proposed de-listing of NBK will have to get approval from 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, KCB said.
It had assets of 714.3 billion shillings last year, while NBK had 114.8 billion shillings worth of assets.