Treasury: KCB Group sure of sealing NBK acquisition deal

Friday, August 16th, 2019 00:00 |
KCB Group CEO Joshua Oigara

KCB Group is confident of sealing its takeover offer of National Bank of Kenya (NBK) by the end of August even as MPs asked National Treasury to reject the transaction. It assured shareholders that negotiation is going on with relevant stakeholders and that the takeover bid for NBK will be finalised by the end of the current quarter.

“KCB plans to finalise the transfer of part of the assets and liabilities of Imperial Bank in Receivership Ltd as well as complete the takeover bid for National Bank of Kenya by the end of the current quarter,” Andrew Kairu, KCB Group chairman said at an investor briefing in Nairobi yesterday.

Group Chief Executive Officer Joshua Oigara said the entity has set itself the goal of convincing nearly all NBK shareholders to accept the offer, which will close on August 30.“Following the move, the best target is to reach 90 per cent in terms of a success rate for all the shareholders,” he said.

An offer to NBK shareholders to swap 10 of their shares for one of KCB is currently open. 

Legislators put a damper on the deal last week when they said the government, which is NBK’s biggest shareholder, should reject the offer, saying it should seek alternative ways to fund the lender despite fears of collapse. 

NBK’s principal shareholders are the National Social Security Fund (NSSF) with 48.05 per cent stake, National Treasury (22.5 per cent) and small shareholders who have 29.45 per cent. The two top shareholders control 70.55 per cent of the bank.

Major shareholders

An industry source who, however, did not wish to be quoted expressed confidence that the deal will continue despite Parliament move to reject the acquisition as long as the major shareholders which are the government and NSSF approve it.

“The doctrine of separation of powers puts such issues in the hands of the executive and once the executive decides that the deal is above board, no one can stop it,” he said.

The call by MPs prompted the market regulator, Capital Markets Authority, to state that the fate of the transaction will depend on KCB attaining a minimum 75 per cent acceptance by NBK’s shareholders.

Acquisition of NBK, which the government says is the best option to deal with its under-capitalisation, is expected to boost KCB’s market share, especially in banking for government entities, where NBK has an advantage.

Speaking during the investor briefing at which the bank reported a five per cent growth in after-tax profit to Sh12.7 billion for the period ended June 30, Kairu said KCB is looking forward to sealing the deal soon and lauded its good performance despite the challenges.

Oigara said the growth in the loan book, increased mobile channel activity and sustained cost-saving initiatives contributed to the group’s net profit.

“We had a strong second quarter and witnessed continued growth across our businesses segments. The investment in technology generated a positive return and further helped drive efficiency and deepen access to affordable financial services in all markets,” he said. 

During the period under review, the group’s net interest income increased by five per cent to Sh25.4 billion, attributable to a 14 per cent expansion of the loan book and a marginal two per cent increase in the interest expense.

The fees and commissions increased by 31 per cent to Sh8.9 billion as revenues from digital channels, in particular, KCB M-Pesa grew significantly powered by the new platform launched late last year.

Operating income

Oigara said the value of loans disbursed via the service during the period under review increased from Sh14.9 billion in the first half of  2018 to Sh66.7 billion in the first half of this year, while the total operating income was up eight per cent to Sh38.6 billion from Sh35.6 billion on the back of strong non-funded income which grew by 15 per cent to Sh13.1 billion.

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