Kenyan Bank Tie-Up Creates Bigger Rival for West Africa Lenders

(Bloomberg) -- Plans to merge two Kenyan banks will create a lender that can compete adequately with West African banks that are expanding into the region, Treasury Secretary Henry Rotich said.

NIC Group Plc, one of Kenya’s mid-sized publicly traded banks, is in merger talks with Commercial Bank of Africa Ltd., the nation’s biggest closely held lender, the two said Thursday. The combined entity would rank among the country’s top three lenders.

Rotich welcomed the move, saying the stronger bank would avail more credit in East Africa’s biggest economy and take on rivals from West Africa that have made forays into the region. Guaranty Trust Bank Plc, Nigeria’s largest lender by market value, and United Bank for Africa Plc, its third-largest lender by revenue, have operations in East Africa.

Both NIC and CBA already operate in Uganda and Tanzania, and CBA has ambitions to operate in 16 African nations.

“One of the biggest constraints we have seen is that Kenyan banks have not been able to play a big role because of their size,” Rotich told reporters in the Kenyan capital, Nairobi.

‘Big-Ticket Loans’

Kenya has about 40 lenders, more per person than South Africa and Nigeria, Africa’s two biggest economies.

Combining the NIC and CBA would create one of East Africa’s largest banks, with total assets of about 452 billion shillings ($4.4 billion), data from their 2017 annual reports show. That would be bigger than Co-Operative Bank of Kenya Ltd., the No. 3 lender. KCB Group Plc, the region’s biggest bank, has total assets of 646.7 billion shillings.

CBA has 46 percent of Kenya’s deposit accounts, according to the central bank, while NIC is a leading asset-finance lender. The two didn’t say whether the tie-up would lead to delisting of NIC. Its shares climbed 32 percent to 30 shillings by 12 p.m. in Nairobi, its biggest jump on record.

“This merger would enable them do much bigger ticket-item loans,” said Faith Mwangi, a Nairobi-based analyst at Exotix Capital Ltd. “If there are clients not getting syndicated loans because either bank’s balance sheet were small, this merger will enable them to finance these type of loans fully in-house.”

©2018 Bloomberg L.P.