This archive report was first published on 15 August 2019.
On August 15, 2019, KCB Group CEO Joshua Oigara expressed confidence in sealing the takeover offer of National Bank of Kenya to boost its market share.
Following the government's cap on commercial interest rates in 2016, lenders in Kenya have turned to consolidation to increase profit growth.
As part of the deal, KCB has offered National Bank shareholders a 10:1 share swap ratio, which is currently open for acceptance.
However, lawmakers have advised the government, National Bank's largest shareholder, to reject the offer, citing concerns over the deal's impact on the banking sector.
According to the Capital Markets Authority (CMA), the fate of the transaction will depend on KCB achieving a minimum 75% acceptance rate from National Bank shareholders.
Joshua Oigara stated, "The best target is to reach 90% in terms of a success rate for all the shareholders," during an investor briefing.
The acquisition of National Bank, which the government views as the best option to address under-capitalization, is expected to bolster KCB's market share, particularly in government banking services.
"This is a business that can easily generate between 3 to 5 billion shillings of earnings every year," Oigara said, adding that National Bank currently generates less than 10% of that amount.
During the first half of the year, KCB Group posted a pretax profit of 17.93 billion shillings ($173.82 million), driven by a 14% increase in lending and a 5% rise in net interest income.
The bank also reported growth in its other businesses, including commissions and fees on transactions.
As part of its efforts to strengthen its loan book, KCB increased its provisions for bad debts to 3 billion shillings during the period, from 0.8 billion a year earlier.
Lawrence Kimathi, KCB's chief financial officer, attributed the increase to the implementation of IFRS 9 accounting standards.
Non-performing loans dropped to 7.8% of the total loan book, from 8.4% in the same period last year, and are well below the industry average of 12.7%.
Joshua Oigara called on parliament to repeal the cap on commercial lending rates, citing its hindrance on private sector credit growth.
