Category Archives: KCB

National Bank Responds to KCB Takeover Bid

National Bank of Kenya (NBK) has published a circular over the proposed takeover by the KCB Group.

KCB has also now published their own circular for NBK shareholders, that has been approved by the CMA and which details their side of the deal.

NBK Circular Highlights:

  • The board of NBK recommends shareholders approve the Kshs 9 billion deal even though they value their share at Kshs 6.10  as no competing offers have been received so far, and the bank, while strong, needs additional capital to meet regulatory capital and grow its business. They add that the Government has a policy of sector consolidation to create strong banks.
  • NBK is the thirteenth largest bank in Kenya, a Tier-2 bank.
  • KCB has proposed that NBK continue to operate as a separate subsidiary of KCB for two years during which there will be no staff changes. An integration will come after, along with an organizational structure review, which may lead to a reduction of the workforce and “optimization” of the distribution network. i.e. branches, ATM’s and agents. NBK has 1,356 staff, serving about 650,000 customers.
  • Deal a foregone conclusion?: After the re-designation of the preference shares, NBK’s two key shareholders, the Government of Kenya and National Social Security Fund own a combined 93.23% of the bank’s shares.
  • KCB valued NBK at Kshs 5.6 billion. NBK has 48,987 shareholders who will receive 147,383,968 ordinary shares in the share capital of KCB, equivalent to approximately 4.59% of the share capital of KCB.. The NBK Board appointed Standard Investment Bank (SIB) to independent advise them on the market value of NBK and SIB arrived at a fair value for each NBK share of Kshs 6.10 – the result of combining the dividend discount method (5.41), net assets multiple (6.62) and historical share trading price (5.01).
  • Listing history: NBK was wholly owned by the Government until 1994 when it sold by 32% to the public through a listing on the NSE, followed by another share sale in May 1996. One of the conditions of the KCB offer is that the NBK shareholders should approve the de-listing of NBK from the NSE.

The NBK board’s opinion on the bank’s valuation is not expected to change anything unless a competing bid materializes – and the deadline for that is July 17.

KCB’s Circular to NBK Shareholders:

  • KCB has invited NBK shareholders to accept their offer by completing and returning forms during the offer period that runs from 10 July to 30 August. If the deal succeeds, their new swapped shares will list on September 16. 
  • On the pricing, NBK traded 26,638 shares per day in the last 6 months. In the last three months, NBK share prices ranged from Kshs 4.3 to 4.5 while those of KCB ranged from Kshs 38 – 44.
  • KCB reserves the right to vary the terms of its offer up to 5 days before the closing date (which means they have a chance to improve on any competing offer).
  • If 75% of NBK shareholders accept the offer, the others will remain minority shareholders in an unlisted (NBK) company, but if over 90% accept, then KCB will move to compulsorily acquire the remaining shares of other NBK shareholders.
  • KCB notes that NBK’s loan book has a non-performing ratio of 49%. 
  • Any share amounts that convert into fractions of a share in the swap formula will be rounded upwards to a full share.
  • There is a long-stop date of Thursday 31 October, 2019, and if the deal is not concluded by then, the KCB offer will lapse, and all acceptances will be considered void.

African Banker Awards 2019 Nominees

The winners of the 2019 African Banker Awards will be announced on June 11 at the Annual Meetings of the African Development Bank (AfDB) in Malabo, Equatorial Guinea. 

Multiple nominees this year include Absa, the Trade & Development Bank, Equity Bank, and Standard Bank while first-time nominees include Family Bank of Kenya who partnered with Simba Pay to enable payments via WeChat to China, Kenya’s largest trading partner. There are also nominees for arranging sovereign Eurobonds and IPO’s, while UbuntuCoin, an asset-backed digital currency that was a finalist at last year’s awards, is nominated again.

The complete list of shortlisted nominees for 2019 are:

African Banker of the Year:  Admassu Tadesse (Trade and Development Bank), Brehima Amadou Haidara (La Banque de Développement du Mali), Brian Kennedy (Nedbank, South Africa), James Mwangi (Equity Bank, Kenya) and Johan Koorts (ABSA, South Africa).

Award for Financial Inclusion: 4G Capital (Kenya), Amhara (Ethiopia), Bank of Industry (Nigeria), Cofina (Senegal), Jumo (South Africa).

Best Retail Bank in Africa: Coris (Burkina Faso), Ecobank (ETI), Guarantee Trust Bank (Nigeria), KCB (Kenya), QNB AlAhli (Egypt).

Deal of the Year – Debt: Absa ($350M Old Mutual Renewable Energy IPP), Afrexim – ($500M ChinaExim Syndicated Loan), CIB ($389M Egyptian Refining Company), Rothschild ($2.2 billion Republic of Senegal Dual-Currency Eurobond), TDB ($1 billion Sovereign Loan to the Government of Kenya).

Deal of the Year – Equity:  Al Ahly (Canal Sugar Equity), EFG Hermes (ASA IPO), RenCap (CiplaQCIL IPO), Standard Bank / RMB (Vivo Energy IPO), Standard Bank IBTC (Flour Mills of Nigeria Rights Issue).

Infrastructure Deal of the Year: Absa (Enel Green Power), Afrexim (Syndicated Loan for EBOMAF/Government of Cote D’Ivoire), National Bank of Egypt (ElSewedy Electric Hydropower Project), RNB (Roggeveld Wind Power Project), TDB (Mozambique FLNG Project).

Innovation in Banking:  ABSA (South Africa), Family Bank (Kenya), KCB (Kenya), MCB Capital Markets (Mauritius), and Ubuntu Coin (Côte d’Ivoire).

Investment Bank of the Year: ABSA (South Africa), Coronation Merchant Capital (Nigeria), NedBank (South Africa), Rothschild, Standard Bank (South Africa).

Socially Responsible Bank of the Year: Access Bank (Nigeria), Bank Misr (Egypt), Equity Bank (Kenya), KCB (Kenya), Qalaa Holdings (Egypt).

KCB to acquire National Bank of Kenya

 

KCB has started the process of integrating NBK into KCB, an exercise that is expected to be completed within the next 24 months, focusing on systems, processes, people and institutional governance. 

KCB has made an all-share offer to acquire National Bank of Kenya in a not too unexpected move. Kenya’s largest bank will acquire the private, but state-controlled, NBK that was wrestling with an undercapitalized position.

KCB will acquire NBK, which has assets of Kshs 115 billion by offering 1 share for every 10 NBK shares. KCB trades at about 45 and NBK at 4.5 and this puts the offer, after conversion of NBK preference shares into ordinary ones, at about Kshs 7 billion. NBK has deposits of Kshs 99 billion and loans of Kshs 47 billion. It issued a rather late profit warning just before reporting a pretax profit of Kshs of 587 million for 2018, in March this year.

Bank shareholders: The NBK results notice also mentioned that its principal shareholders had committed to increase the capital of the bank a year ago. The Government of Kenya and the National Social Security Fund (NSSF) are significant shareholders in both KCB and NBK. At KCB the Government owns 17.5% and NSSF 6.12% while at NBK, the workers’ fund has 48% and the Government has 22.5%.

This deal presents an opportunity to rescue National Bank whose capital to asset ratio had dipped to 3%, far below the statutory minimum. The Government has grappled with how to restructure its portfolio of struggling banks and this option is a cash-less one that will see it and NSSF increase their shareholdings in KCB as other NBK shareholders gain by obtaining shares in the Kshs 714 billion KCB, the regional banking leader. Trading of shares of both banks was briefly halted on Friday morning, prior to the announcement.

Conditions of the deal to go ahead include approval by 75% of NBK shareholders (NSSF and the government own a combined 70% of the shares), while the Government is to also convert 1.135 billion preference shares in NBK into ordinary shares, representing a recapitalization of the bank by Kshs 5.7 billion. Also, if the deal is concluded, NBK will be delisted from the Nairobi Securities Exchange.

Banking M&A: KCB is now in the process of acquiring two banks – NBK and Imperial as two weeks ago the CBK and KDIC announced an improved offer deal with KCB for Imperial’s assets. The deal news comes in a week after NIC and CBA shareholders approved a merger of their banks.

It remains to be seen if Equity and Stanbic, which have expressed takeover designs on NBK over the last decade, will put in a bid for NBK. And also what will happen to other banks in similar positions of being in dire need to raise capital from their shareholders to meet statutory requirements.

EDIT October 4: KCB Group announced the completion of the successful take-over of National Bank (NBK) and listed an additional 142,979,717 shares of KCB at the Nairobi Securities Exchange for shareholders of NBK.

KCB has started the process of integrating NBK into KCB, an exercise that is expected to be completed within the next 24 months, focusing on systems, processes, people and institutional governance. 

KCB relaunches M-Pesa loans with zero interest options

KCB has relaunched KCB M-Pesa loans, small value short-term loan product, with zero interest option along with allowing customers to top-up to their current outstanding loans and roll over loans past the one month.

KCB M-Pesa was launched back in March 2015 in partnership with Safaricom, and they are available from the Safaricom SIM toolkit.  The re-launch came after the migration of the service on to a new platform in partnership with Huawei that will process transactions faster and which is more stable.

KCB CEO Joshua Oigara said that the bank was disbursing Kshs 7 billion worth of loans through mobile, an amount that used to be disbursed over six months at their traditional branches. He announced that the platform improved would bring three new changes to the loan product namely; automatic roll forward of loans if a customer was not able to repay in thirty days, customers could not top-up loan until they reach their credit limits(previously they had to repay an existing loan, in order to qualify for a new ones) and customers will pay zero percent (0%) loan interest if they repay loans on the same day. The zero interest loan offer runs from December 18, 2018, to 17 January 2019 and during this period, customers will be able to enjoy one interest-free loan per week as long as the loan is repaid by midnight of the same day.

Also present at the launch were CEO of Safaricom, Bob Collymore, and Kenya’s Cabinet Secretary for ICT, Joe Mucheru.

Top Imperial Bank Depositors to received end with 35% of funds

EDIT April 5, 2019: CBK and KDIC announced that they have accepted a final and revised offer from KCB for Imperial Bank that is 19.7% over and above the 35% recovery announced in December 2018. The remaining depositors of Imperial will be paid 12.5% of the funds with the signing of the agreement, 12.5% on the first anniversary and then 25% over the subsequent three years during which their funds will earn interest.

KCB will take over five branches of Imperial as KDIC and CBK will explore further options for the remaining branches (Earlier it been announced that NIC bank would take over Imperial’ s branches). The deal excludes Kshs 36 billion (~$360 million) of loans that are being pursued through litigation in the courts.

Original December 16, 2018: The Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation announced the conclusion of the Imperial Bank receivership that will probably not satisfy customers who still had vast sums deposited at the bank that was suddenly closed in 2015.

KDIC and CBK announced  they had accepted a modified biding offer from KCB, Kenya’s largest bank for Imperial Bank (in receivership) that comes with a payment of 12.7% of the balances that were owed to the remaining depositors.

Since making a first payment in three years ago through KCB and Diamond Trust, of up to Kshs one million that took care of most of teh small depositors, further payments have been availed  to larger depositors. But with the acceptance of the offer today, they will have only accessed 35% of the deposits held in the bank when it was placed under receivership, with the balance of the funds now uncertain.

A loan verification process will be done through teh first quarter of 2019 after which depositors may be able to receive more of their funds

The collapse of the bank started in the days after the the sudden death of its Managing Director, after which revelations of fraudulent accounts he managed, secret off-the-book loans, fishy undocumented cash transfers came to light.