December 6, 2018 / 2:39 PM / 9 days ago

UPDATE 2-Kenya's NIC Bank and Commercial Bank of Africa to explore merger

(Adds analyst)

NAIROBI, Dec 6 (Reuters) - Kenya’s NIC Bank and Commercial Bank of Africa will hold talks on a potential merger, to combine their separate expertise in retail and corporate banking, they said in a joint statement on Thursday.

NIC is a mid-sized lender while CBA is ranked among the top banks in the East African nation. The potential merger would be the first major deal announced in the industry since the government capped commercial lending rates in 2016.

The potential value of the deal is not yet known.

“The boards believe that combining the business of two highly profitable entities would create enhanced capacity through capital consolidation and strong liquidity to capture strategic growth opportunities,” they said.

The transaction, which would be subject to shareholder and regulatory approval, would allow both banks to invest in new technology, boost products for customers, and generate higher returns, they said.

The rate cap, set at four percentage points above the central bank’s benchmark lending rate which stands at 9 percent, has hit second-tier lenders’ ability to price risk, causing the quality of their loan book to deteriorate and forcing lenders such as NIC to consider suitors, analysts said.

“The long-awaited consolidation in the sector is here,” said Aly Khan Satchu, an independent analyst in Nairobi.

Valuations on the local bourse had also fallen to a 10-year low after a prolonged bear run this year, making the potential deal attractive, he said.

NIC has been the leading bank in asset financing and it also has a strong base of mid-sized corporate clients. CBA on the other hand has a strong retail client base, including digital only customers on its M-Shwari mobile platform.

Reporting by Duncan Miriri; Editing by Kirsten Donovan and David Evans

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below