Kenya’s KCB Group to complete acquisition of National Bank of Kenya by October 2019

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KCB Group, Kenya’s biggest lender said it expects to complete its acquisition of National Bank of Kenya by October 2019.

Last month, KCB 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.

KCB, which also operates in Uganda, Tanzania, Rwanda, Burundi and South Sudan, is 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 transaction revealed that the proposed offer was designed to serve 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 percent in 2023 said KCB, which had a return on equity of 23 percent last year.

The transaction will be the second major deal among Kenyan lenders since the government capped commercial lending rates in 2016, a development that reduced their profit margins and forced 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 also been other smaller transactions including Diamond Trust Bank’s acquisition of Habib Bank Kenya in 2017.

KCB is finalising the acquisition of 25 billion shillings ($247 million) worth of assets from Imperial Bank, which collapsed in 2015. The Group said it has not given a valuation for NBK, but the merged entity could have a balance sheet of 1 trillion shillings ($9.90 billion) by the end of 2022.

Last year, KCB had assets of 714.3 billion shillings, while NBK had 114.8 billion shillings worth of assets.

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