NAIROBI, Kenya Mar 29 – In light of tough operating conditions in Kenya, Southern Credit Bank and Equatorial Commercial Bank (ECB) have signed a merger agreement.
Sighting fierce competition in the banking sector Equatorial Commercial Bank Managing Director Peter Harris said smaller banks were increasingly finding it harder to function and faced the risk of closing or seeking potential suitors to synergies their operations to stay in business.
“When you go to the market you have to have something to sell and you have a choice. You can either do this organically which is slow and not easy or you get together with other parties and come up with something bigger,” Mr Harris told journalists in Nairobi.
The two banks are however yet come up with finer details of the merger, which is scheduled to be competed in April. The deal is also subject to approval by both the Central Bank of Kenya (CBK) and shareholders of both banks.
The new entity will go by the name Equatorial Commercial Bank.
The deal comes at a time when CBK’s monetary policy is actively encouraging strategic partnerships of this kind to create a stronger financial sector in Kenya. Mr Harris said the merger is part of both banks’ strategies to strengthen their balance sheets and diversify their product and service offerings.
The merger will also help the new bank raise its core capital to Sh1 billion in line with the CBK’s 2012 deadline for all banks to increase their core capital.
“This is a strategic move and we will be a major player in the market soon,” he said.
For a long time the two banks have remained niche minded with ECB focusing on the corporate sector while Southern Credit concentrated on the retail and Small and Medium Enterprise segment.
“This gives an opportunity to bring all these aspects together and strengthen the business,” Southern Credit chairman Jeffrey Bamford said.
The two banks expect the merger to be seamless given they both use similar core-banking systems. The deal will bring their network to 12 branches spread across Kenya.
The new entity will also have a stronger balance sheet with a combined total of Sh16 billion in assets and deposits placing it among the top middle tier of banks with a broader customer reach.
Mr Harris who has wealth of experience having worked with Citibank New York, Hong Kong, Nigeria and Kenya will lead the new bank.