NIC Group and CBA in merger talks

December 6, 2018 (5 days ago)
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Incorporated in Kenya in 1959 NIC Group has 42 branches in Kenya, five branches in Tanzania and three branches in Uganda with an asset base of Sh206 billion as at the end of 2017/file

, NAIROBI, Kenya, Dec 6 – NIC Group PLC and Commercial Bank of Africa (CBA) have announced that their Boards of Directors have authorized the commencement of discussions regarding a potential merger of the two entities.

In a joint communiqué the two banks say the merger would create one of the largest financial services groups in the region.

Incorporated in Kenya in 1959 NIC Group has 42 branches in Kenya, five branches in Tanzania and three branches in Uganda with an asset base of Sh206 billion as at the end of 2017.

NIC is listed on the Nairobi Securities Exchange and made Sh5.6 billion in pre-tax profit as at December 31, 2017.

CBA on its part has been in operation for the last 50 years also has branches in Kenya, Uganda and Tanzania with asset base of about Sh245 billion as at December 31, 2017 and made Sh5 billion net profit in the period under review.

“It is the view of the two Boards that the potential merger would bring together the best in class retail and corporate banks with strong potential for growth in all aspects of banking and wealth management. A combined entity would create a complementary base of over 38 million customers, a strong digital proposition and a robust corporate and asset finance offering,” the Joint communiqué said.

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.

The two firms believe that the combined group would be strongly placed to play a bigger and more significant role in the banking sector and the economies of Kenya, the region and beyond.

“A combined larger group would provide new and greater opportunities for employee development, advancement and growth. It is important to note that an eventual merger remains subject to due diligence processes, shareholder, regulatory and other approvals,” the banks stated.

During this phase of discussions the two entities will continue to operate independently.

“The Boards of Directors wish to emphasize that the discussions are preliminary in nature and as such only limited information can be disclosed at this stage. The two entities are committed to the highest standards of governance and regulatory disclosure and will update the market as and when there are any material developments,” the statement read.

This will be the eighth acquisition deal in Kenya’s banking sector in the last three years.

Other deals include, Mauritian Bank SBM Holdings acquiring 100 per cent stake in Fidelity Commercial Bank, and Chase Bank, Tanzanian Bank M acquiring 51 per cent of Oriental Commercial Bank, GT Bank acquiring Fina-Bank, Mwalimu SACCO acquiring Equatorial and I&M Holdings acquiring Giro Bank.

Centum investments also acquired 66 per cent stake in Sidian Bank formerly K – Rep Bank while Chicago-based private equity fund Equator Capital Partners LLC, under its ShoreCap II fund bought 15 per cent stake in Jamii Bora Bank.

Analysts at Cytonn Investments are of the view that consolidation in the banking sector will only gather pace going forward, with weaker banks being forced to merge or acquired.

Local stable banks will also seek to acquire banks aligned with their strategies.

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