Kenya’s foremost financial institution, KCB Group, is on the verge of revealing the sale of its subsidiary, National Bank of Kenya (NBK). While the exact value of the transaction remains undisclosed, speculation suggests that an unidentified Nigerian lender could be the prospective buyer.
The news of this impending sale has already sparked positive market activity, with KCB Group shares witnessing a notable surge in early trading. As of 0645 GMT on the Nairobi Securities Exchange, KCB shares climbed by 7% to reach 26.00 shillings ($0.1970).
KCB’s acquisition of NBK in 2019, facilitated by the central bank, aimed to rescue the medium-sized lender, which was previously under state control. Despite initially signaling a long-term commitment to NBK, recent indications from KCB’s investor briefing suggest a potential shift in strategy, hinting at a possible divestment.
The set sale of National Bank of Kenya by KCB Group was first reported by Reuters, citing Kenyan publication Daily Nation, which disclosed the information from unnamed sources.
What you should know
Eric Musau, the head of research at Nairobi-based Standard Investment Bank, attributed this potential divestment to the narrowing capital adequacy ratios observed over the past two years. NBK’s core capital to risk-weighted assets plummeted to 6.9% by the end of September last year, significantly below the regulatory threshold of 10.5%.
- “If the proposed sale materializes, KCB would be well-positioned to offer shareholders a lucrative return,” remarked Musau, showing the financial rationale behind the divestment decision.
KCB’s expansionary ambitions in other regional markets have also factored into the strategic calculus. In recent years, the bank has pursued acquisitions in neighboring countries, such as the Democratic Republic of the Congo, where it acquired an 85% stake in Trust Merchant Bank in late 2022.
These ventures, while contributing to KCB’s regional footprint, have exerted additional strain on the bank’s capital reserves.
As KCB prepares to unveil further details at its scheduled investor briefing later today, market observers eagerly await confirmation of the proposed sale and its potential implications for both KCB Group and the broader banking landscape in Kenya.