This archive report was first published on 27 November 2019.
On November 27, 2019, Standard Investment Bank (SIB) predicted that NCBA Group would increase its dividend payouts, thanks to the cost-saving measures and reduced funding costs resulting from the merger of NIC Bank and Commercial Bank of Africa (CBA).
The merged entity, which is now a tier I bank, is expected to realize significant cost savings, releasing more funds for shareholders. SIB estimates that the dividend payout will increase from 20% to around 25%.
The merger has also resulted in a 10-15% growth in earnings for NIC Group shareholders who swapped their shares during the deal. This growth is expected to continue in the coming years, driven by the expansion of the retail business and the reduction in the cost of funding.
However, the merged entity is expected to incur higher capital expenditure in the coming years, particularly in the expansion of its retail business. Additionally, higher operating expenditure is expected to be sustained over the coming year to support post-merger branding activities.
According to SIB, the combined entity has a liquidity ratio of 53.3% for CBA and 49.7% for NIC, making it well-placed to take advantage of lending activities post-rate cap. This is expected to boost its interest margin, driven by the growth of non-funded income from products such as M-Shwari and Fuliza.
