NIC Bank (NSE:NICB) shares jumped 32 percent on news of merger talks with Commercial Bank of Africa (CBA), raising the mid-tier lender's shareholder wealth by Sh4.7 billion.
The bank share closed trading at Sh30 a piece, up from Sh22.65 on Thursday—reflecting a rise of 32.4 per cent in a day of increased demand amid thin supply of its stock at the Nairobi bourse.
The merger announcement came at a time when NIC’s share price has taken a beating at the Nairobi Securities' Exchange (NSE), making it one of the cheapest banking stocks after nearly halving to close at Sh22.6 yesterday.
If successful, the merger will bring together the business interests of two of Kenya’s wealthiest families — the Kenyattas and the Ndegwas — who have controlling stakes in CBA and NIC, respectively.
Former Central Bank of Kenya governor Phillip Ndegwa owns a quarter of the bank and the share rise grew the worth of their stake to Sh4.79 billion, representing a gain of Sh1.17 billion in a day.
The potential merger would be the first major deal announced in the industry since the government capped commercial lending rates in 2016 and will create Kenya’s third-largest lender by assets.
“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,” they said.
The transaction, which is subject to shareholder and regulatory approval, would allow both banks to invest in new technology, boost products for customers and generate higher returns, they said.
NIC Bank is strong in asset finance and has in recent years sought to expand its presence in retail banking with the opening of more branches and launch of digital banking platforms.
CBA, on the other hand, is strong in corporate banking where it specialises in disbursing big-ticket loans to a relatively smaller customer base. It also has a presence in the micro lending business through mobile banking platform M-Shwari.
Treasury secretary Henry Rotich welcomed the merger talks yesterday, arguing a deal would help strengthen the financial sector.
“Consolidation of the financial sector is something of importance,” Mr Rotich said.
“Treasury has been supportive of a sector that is well served by stronger banks....So as you see more banks consolidating on voluntary basis, that is a welcome move, so that we can ensure that the banks are strong enough to provide sufficient credit to SMEs.”
