Kenya’s KCB Group sees acquisition of NBK sealed by October

Kenya’s biggest lender by assets, KCB Group, expects to complete its acquisition of National Bank of Kenya by October, it said on Thursday.

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% in 2023 said KCB, which had a return on equity of 23% 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 finalizing the acquisition of Ksh25 billion ($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 Ksh1 trillion ($9.90 billion) by the end of 2022, KCB said.

It had assets of Ksh714.3 billion last year, while NBK had Ksh114.8 billion worth of assets.