The highly anticipated NBK takeover by KCB has been put on a drastic hold after a Parliamentary committee opposed the proposed move.
This comes after the National Assembly’s Departmental Committee on Finance and National Planning, chaired by MP for Kipkelion East, Joseph Limo tabled a report on Thursday in Parliament saying that the NBK takeover by KCB is not in the interest of NBK’s employees, taxpayers, and its minority shareholders.
The National Bank of Kenya is at the brink of collapsing, with the Central Bank of Kenya citing that the ailing bank needs rescue.
The report by the committee has recommended that NBK’s principal shareholders, the National Treasury (22.5 percent) and the National Social Security Fund (NSSF) (48.05 percent), reject Keny Commercial Bank’s offer to acquire 100 percent shareholding, the minority shareholders and other shareholders.
The committee, consequently recommended that the Treasury should seek an alternative financier despite fears of the Bank collapsing if the planned buyout falls apart.
NBK’s preference shares have recently been converted into ordinary stocks, making the Treasury and NSSF control an even bigger effective shareholding of 93.23 percent.
This conversion has consequently taken the two shareholders above the minimum legal threshold required for a takeover transaction to be declared successful.
Parliament has now recommended that the government finds funding to recapitalize NBK, something that the Treasury has failed to achieve in the past decade pushing the bank to the brink of collapse.
The report cited that the takeover did not make sense since NBK is the stronger bank with a total of 86 branches across the country.
“The main challenge the bank is facing it that of core capital and the total risk: weighted assets ratio, which is 2.4 percent, below the minimum statutory requirement of 10.5 percent,” the committee report reads.
NBK currently has a core capital to deposits ratio of 2.2 percent against a minimum requirement of 8 percent, leaving the bank unable to give loans and take deposits.
According to the committee, as far as liquidity ratios are concerned, NBK is performing well at 40.4 percent as compared to KCB which is at 35.6 percent.