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Another Kenyan bank enters TZ

NAIROBI, Kenya, Dec 22 – NIC Bank has announced plans to acquire a 51 percent stake in one of Tanzania’s mid-sized commercial banks; Savings & Finance Commercial Bank Limited.

The proposed acquisition of a majority interest in Savings & Finance Commercial Bank (S&F) marks NIC Bank’s first cross-border acquisition and underlines the Board’s growth strategy for expansion in the region.  Following the imminent completion of the transaction, S&F will become a 51 percent-owned subsidiary of NIC Bank.

NIC Bank’s Chairman James Ndegwa said that the acquisition will complement the Bank’s organic growth as evidenced by the current rollout of a branch expansion strategy across Kenya. “This has been supported by the funding from the successful rights issue in November 2007 that raised Sh1.2 billion,” said Mr Ndegwa.

NIC Bank’s Managing Director James Macharia indicated that this transaction will enhance the Bank’s competitive position in the region, diversify its business and enhance services to its cross-border customers.  “S&F is a natural partner for our growth and diversification efforts as it has reported steady growth and profitability.

In addition, its shareholders and directors have significant experience in the Tanzanian financial sector and this will definitely strengthen our competitive position,” said Mr Macharia.

Savings & Finance Commercial Bank was founded as a non-bank financial institution in 1994, converted to a fully-fledged Commercial Bank in 2005 and has branches in Dar es Salaam, Mwanza and Arusha. 

As at December 31 2007, S&F had total assets of TSh42.6 billion and shareholders’ funds of TSh5.9 billion.  For the year ended December 31 2007, S&F generated profit before tax of TSh1.4 billion on an operating income base of TSh3.7 billion.

In addition to the share purchase, NIC Bank will subscribe for additional equity in S&F to be payable partially by way of a cash payment of TZS 2,606,100,000 (equivalent to KES 155 million) and a further subscription on the basis of S&F’s audited net profit for 2008. 

The existing shareholders of S&F will also be injecting approximately Sh149 million by acquiring new shares.  This additional capital will be used to fund the business plan of S&F in the medium term with a view to enhancing the Bank’s market share, capacity and geographical outreach.

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Mr Macharia indicated that the acquisition was subject to NIC Bank obtaining regulatory approvals from the Minister of Finance of Kenya (acting through the Central Bank of Kenya) and also obtaining approvals from the Bank of Tanzania and the Fair Competition Commission of Tanzania.

“We are confident that the regulatory authorities involved will expeditiously grant the requisite approvals and thus facilitate completion of the transaction by April 30, 2009,” he said.

The transaction is also subject to approval by the East African Development Bank (current holder of preference shares) and from NIC Bank’s shareholders at an extraordinary general meeting (EGM) to be convened shortly. 

NIC Bank’s Board of Directors will shortly issue a circular to the shareholders providing information on the proposed transaction and on S&F, which will include a notice of the EGM. 

Mr Ndegwa also emphasised that S&F’s existing shareholders, who will retain 49 percent of the issued ordinary shares, will continue to play an important role in S&F’s future growth.

“The most important aspect of this deal is that it is a partnership between NIC Bank and the existing shareholders of S&F.  We both have a common goal and shall work together to achieve it,” said Mr Ndegwa.

NIC Bank recently launched a rebranding process aimed at repositioning the Bank for future business development. Mr Ndegwa said that the bank’s expansion, both in Kenya and the Eastern African region will be prudently planned and implemented.

The Bank opened four new branches in both Nairobi and Mombasa in 2008 and plans on opening new ones in Thika and Kisumu in early 2009, as part of its plan to open up to an additional 20 branches over the next three years.

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