Nigeria’s central bank has yet to clear the purchase of the National Bank of Kenya (NBK) by Lagos-headquartered Access Bank despite its Kenyan counterpart approving the deal, further delaying the exit of KCB Group.
The Central Bank of Kenya (CBK) approved the sale of NBK to the Nigerian banking giant by KCB Group on Friday, removing the first hurdle in closing the multi-billion-shilling acquisition deal.
The Central Bank of Nigeria (CBN) had placed a condition for Access Bank to sell its Democratic Republic of Congo (DRC) subsidiary and conduct a review of the lender’s London operations before the deal could be completed.
The Nigerian regulator also demanded that the CBK clear the Kenyan part of the deal first.
It is not clear why Nigerian authorities linked the purchase of NBK to the divestiture of Access Bank in the DRC and the restructuring of London operations.
Access Bank and CBN on Monday failed to respond to Business Daily questions on the deal, but KCB acknowledged the Nigerian regulatory hurdle in trying to closing the deal.
“There is a pending approval by the Central Bank of Nigeria, for the transaction to be considered complete,” KCB said in a statement in the wake of the CBK approval. Under the deal, some undisclosed assets and liabilities of NBK will not be transferred to Access Bank, possibly leaving KCB Bank with some problematic loans. NBK was also known as a banker for government entities.
KCB remained guarded on the assets and liabilities to be transferred from the subsidiary, saying it would disclose them at the deal’s conclusion.
Kenya’s second-biggest lender bought NBK, a medium-sized lender that was then controlled by the State, in a rescue deal engineered by the central bank in 2019.
The government said the buyout was the best option to deal with NBK’s under-capitalisation.
Access Bank has operations in 23 countries after an aggressive growth into new markets.
It is Nigeria’s biggest bank by assets and in December raised $228 million in a rights offer to boost its capital above a new regulatory threshold as it embarks on an expansion plan.
Access Bank’s share capital — at 600 billion naira — rose 20 percent above the minimum required for international banks operating in the West African country.
The fundraising will help the bank, controlled by Access Holdings Plc, accelerate its expansion into new markets, including Morocco, Egypt and the US, and double the share of assets outside its home market by 2027.
In Kenya, Access Bank already runs a small bank after another acquisition of Transnational Bank from the family of former president Daniel arap Moi.
It hopes to ride on NBK to expand in the country and take advantage of growing trade in the region.
KCB had initially indicated it was invested in NBK for the long haul. However, narrowing capital adequacy ratios in the past two years may have prompted a rethink. NBK’s core capital to risk-weighted asset ratio was at 9.0 percent in December, below the minimum requirement of 10.5 percent.
KCB and Access Bank signed a binding offer on the acquisition of NBK in March last year and initially expected to close the deal before the lapse of 2024.
Access Bank entered the DRC in 2009 through the acquisition of Banque Privée du Congo (BPC), which is now known as Access Bank (RD Congo).
The bank operates branches across the DRC, including Kinshasa, Goma and Lubumbashi.
The subsidiary was profitable at the end of 2023, having posted a net income of Sh563.3 million (6.7 billion naira).
CBN is pushing for Access Bank to quit the DRC amid continued struggles by Nigerian banks in the central African country, where they have faced hurdles in adapting to the local market in an economy beset with volatile inflation, currency depreciation and liquidity crises.
The struggles witnessed by the Nigerian banks in the DRC, including market share growth, may have prompted regulatory actions to reduce their exposure in the market.
Kenyan banks, in contrast, including the KCB Group, have found success in the DRC. KCB Group has its largest regional operation in the country following its recent acquisition of the Trust Merchant Bank (TMB).
Equity Bank’s subsidiary in the DRC posted a profit of Sh12.1 billion in 2023, while KCB’s Merchant Bank had a Sh16.8 billion profit.
Profitable brands
The success of Kenyan banks in the DRC is partly attributable to their acquisition of stronger and more profitable brands, in contrast with their Nigerian counterparts.
Equity acquired the Banque Commerciale du Congo (BCDC) - a significant lender in the DRC- from the family of businessman George Forrest in 2020, adding to its already existing unit of Equity Bank Congo, which was born out of the acquisition of German bank ProCredit previously.
KCB has retained NBK’s price tag at 1.25 percent of its prevailing book value, which puts the expected proceeds from the sale at Sh16.2 billion on December numbers, up from Sh12 billion a year earlier.
NBK swung back into profitability in 2024, posting a net income of Sh993 million from a Sh3.3 billion loss on the back of lower operating expenses, including loan-loss provisions and staff costs.
