CMA yet to receive KCB Group notice of National Bank takeover plan

The Capital Markets Authority (CMA) says it has not received any notification about Kenya Commercial Bank’s (NSE: KCB) proposal to acquire a stake in National Bank of Kenya (NSE: NBK).

“We wish to clarify that no regulatory filings have been made to the Authority by KCB Group regarding this matter and no confirmation of the existence of such a transaction has been received,” the Capital Markets Authority said in a statement signed by its Chief Executive Officer Paul Muthaura on Tuesday.

In the proposal, KCB intends to buy 70  percent of National Bank through a share swap.  However, the deal had not been  formally lodged with CMA.

KCB and NBK jointly account for about 60 percent of Government deposits which collectively account for less than 10 percent of total banking industry deposits. KCB is offering to create a new and affordable credit regime where the youth, the housing sector, agriculture, Small and Medium Enterprises and micro enterprises will be charged between 8-9 percent at 2-3 tenors instead of the normal one year.

Analysts in the market term the move ‘an ambitious undertaking given the current poor health of bank loan books across the industry.

“KCB’s Non-Performing Loan Ratio was at 8 percent as at 1Q17) and limited room for lending evidenced by competition in the sector for the small pockets of opportunity,” according to Genghis Capital.

“Overall, our key risk remains exposure of KCB to significant corporate governance issues that NBK has had over the years.”

“In our view, the business advantage of KCB acquiring NBK remains minimal with risk of the Government in future using KCB to save its other struggling banks. This would result in erosion of shareholder value for KCB with no real benefit,” they note.

Cytonn Investments Q1’2017 Banking Sector Report, ranked KCB Group as the most attractive bank supported by a strong franchise value and intrinsic value score.

The franchise score measures the broad and comprehensive business strength of the company across 13 different metrics, and the intrinsic score measures the investment return potential.

National Bank ranked lowest, ranking low in both franchise and intrinsic value score.

Read: Kenyan Listed Banks Witness 8.6pc decline in core EPS in Q1’2017

Thus, CMA cautions  the public to exercise caution when dealing with the shares of both KCB Group and National Bank limited.

“An appropriate announcement shall be made in the event that details of such a transaction (if any) are filed with the Authority as required by the applicable Regulations.”