NIC shares at new high as CBA merger plan unfolds

Commercial Bank of Africa Westlands branch. /ENOS TECHE
Commercial Bank of Africa Westlands branch. /ENOS TECHE

The Commercial Bank of Africa (CBA) and National Industrial Credit Bank (NIC) merger is expected to be completed by September after requisite approvals.

“We hope to get shareholder approval in the first quarter, regulatory approval in the second and on the third quarter operate as a merged entity,” NIC managing director John Gachora told a a joint press briefing yesterday.

The announcement saw NIC shares at the Nairobi Securities Exchange hit a high of Sh36.6 from Sh29.1, a 24.74 per cent rise.

The merger will see NIC bring its strength in asset financing together with CBA’s stronghold in corporate and micro lending through M-Shwari to make the joint entity the third largest lender in the country by asset value.

The combined asset base in excess of Sh444 billion will give the duo muscle to compete with KCB and Equity, currently Kenya’s largest lenders with asset values of Sh684 billion and Sh560 billion respectively. It will also be the second largest bank in Kenya by customer base after Equity Bank which has just above 9.2 million customers.

If the numbers from Safaricom’s mobile banking savings and loans account, M-Shwari are factored in, CBA alone has more than 10 million customers. The banks will need to obtain the required shareholder and regulatory approvals and various transaction agreements between both lenders.

“Ultimately, the shareholders of CBA will exchange their shares in CBA for new shares in NIC Group, which will be the holding company of the merged businesses,” CBA managing director Issac Awuondo said.

This means the 34 shareholders of CBA will own 53 per cent of the merged business with NIC Bank while NIC shareholders will own 47 per cent. Awaiting the necessary approvals, the two entities will continue to operate independently with NIC Group remaining listed on the Nairobi bourse.

CBA which is not among the listed banks is widely known for its partnership with Safaricom to offer M-Shwari loans and the recently launched overdraft product Fuliza.

The merging of NIC a mid-sized lender and CBA, a tier one lender will result to no layoffs as the lenders plans to retain all 2,360 staff in more than 100 branches.

The joint lender’s will have a footprint in five regional economic centres including Nairobi, Kampala, Dar es Salaam, Kigali and Abidjan.

“No Job cuts expected with the merger, as we are set to focus on growth, no branches expected to be closed,” Gachora said

He said the combined banks will now have the ability to drive growth and support Kenya’s ambitious economic agenda.

NIC’s share price at the NSE eased slightly to close at Sh33.75.

“This transaction, if successfully concluded, may have a material effect on the price of NIC Group’s and NIC Bank’s securities,” Gachora said.