Commercial Bank of Africa (CBA), which in 2017 took over Crane Bank Rwanda has merged with National Industrial Credit Bank (NIC) to create the third-biggest bank in the region.
According to the Reuters, merging banks will have an asset base of US$4.4 billion, making it the region’s third-largest by assets after Kenya Commercial Bank (KCB) and Equity Bank.
According to Business Daily, there has been pressure on Kenyan banks to consolidate in response to a 2016 cap on commercial lending rates.
The rate cap has hit second-tier lenders’ ability to price risk, affecting the quality of loans and forcing lenders such as NIC to consider suitors, analysts say.
Last year, Kenya’s Finance Minister Henry Rotich welcomed the merger talks between the two banks, saying the deal will help to strengthen the financial sector.
The transaction will involve a share swap between the two banks, with current NIC group shareholders owning 47 pct of the merged entity and CBA shareholders owning 53 pct.
NIC group will remain listed, NIC CEO John Gachora told Reuters.
After the merger, the banks said they would also have a presence on mobile platforms in Tanzania, Uganda and Rwanda and Ivory Coast, in collaboration with telecoms firms in the four countries.
The merged group will also have more than 100 branches, spanning Kenya, Tanzania, Uganda, Rwanda and Ivory Coast.
A joint statement noted that merging would put their customer base at about 38 million across the region. “It is the view of the two Boards that a potential merger would bring together the best in class retail and corporate banks with strong potential for growth in all aspects of banking and wealth management.
A combined entity would create a complementary base of over 38 million customers, a strong digital proposition and a robust corporate and asset finance offering,” the statement read in part.
The move also comes amidst a development by regulators across the region requiring banks to raise their respective capital.
In Rwanda, the Central Bank will require locals to raise their minimum capital from the current Rwf 5bn to Rwf 20b according to a new draft licensing regulation for the sector.
CBA entered the Rwandan market in 2017 after acquiring the now defunct Crane Bank Rwanda. The sale of Crane Bank Rwanda came months after the parent bank, Crane Bank Uganda, was sold to Uganda’s Dfcu Bank.
A number of local banks had also expressed interest in Crane Bank Rwanda, which had two branches in the country.
Crane Bank had entered the Rwandan market in 2014. The capitalisation challenges at Crane Bank Uganda and consequent takeover of the management by Uganda’s central bank did not have direct effect on its Rwandan subsidiary, officials from National Bank of Rwanda said.
This is because foreign players do not open branches in Rwanda as they are expected to register separate entities and operate in accordance to the Rwandan Laws and within the regulation of the Rwanda’s Central Bank.