Rotich pushes for bank mergers

Kenyan commercial banks should seek consolidation opportunities to strengthen and take advantage of business opportunities across the African continent, Treasury secretary Henry Rotich said last Friday.

Speaking during the signing of a Sh13 billion financing commitment with the German government, Mr Rotich welcomed the announcement of a merger between NIC Bank and Commercial Bank of Africa (CBA), saying it represented the direction that local banks should take.

He said West African banks had taken advantage of their size to expand into the rest of Africa and Kenyan financial institutions would similarly benefit from increased stability and strength.

“The merger is very welcome. Kenyan banks will benefit from increased stability and will be stronger when they are bigger. This should help our banks to be able to take advantage of opportunities elsewhere in Africa,” said Mr Rotich.

Ecobank and UBA banks that currently operate in Kenya have their origin in West Africa. They have been expanding across the continent in the past decade.

NIC and CBA announced the merger on Thursday, which, if successful, will create the third largest lender by assets in Kenya after KCB Group and Equity Bank.

The new entity will have Sh444.3 billion in total assets based on disclosures at the end of September, relegating Co-op Bank to the fourth from its current third position.

The merger is subject to approval by shareholders and regulators.

NIC has traditionally been strong in asset finance and has sought to expand its retail market presence with new branches and the launch of digital banking platforms. CBA, on the other hand, has been strong in corporate banking with ability to give big-ticket loans.

The merger places them in a stronger position to confront the headwinds that have faced the industry since the commencement of restrictions on movement in lending rates in September 2016.