Kenya: KCB Group wins shareholders for National Bank’s takeover

Kenya’s biggest lender by assets KCB Group won shareholders' approval on May 30 for its proposed takeover of National Bank of Kenya in a 10-for-1 share swap transaction.

The deal, which still requires the regulatory approval and the backing of NBK’s shareholders, was passed unanimously at KCB’s annual general meeting.

KCB, which also operates in Uganda, Tanzania, Rwanda, Burundi and South Sudan, made the takeover offer last month, joining a wave of consolidation in Kenya’s banking industry.

“The acquisition is an opportunity to strengthen the deposit base and lending capacity, increase cost efficiencies due to economies of scale and boost transactional revenue through leveraging of technology,” said KCB Chairman Andrew Wambari.

The acquisition will give the group the scale to compete more effectively in a changing financial sector, the chairman said, pointing to NBK’s “strong deposit franchise and a wide branch network”. The combined entity could attain a return on equity of 26.9 percent in 2023, said KCB, which had a return on equity of 23 percent last year.

KCB has not given a valuation for NBK. The merged entity could have a balance sheet of 1 trillion shillings ($9.88 billion) by the end of 2022, KCB said this month. It had assets of 714.3 billion shillings last year, while NBK had 114.8 billion shillings of assets.

On the Nairobi Securities Exchange, KCB’s shares traded 0.9% down at 40 shillings at 1000 GMT. National Bank shares were unchanged at 4.10 shillings.

The proposed transaction would be the second major deal among Kenyan lenders since the government capped commercial lending rates in 2016, squeezing lenders’ profit margins and forcing them to look for survival strategies, including consolidation, Reuters reported.

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.

Also Read: National Bank of Kenya announces Sh106mn tax profit in Q1 2019