Kenya Commercial Bank Group (KCB Group) CEO Joshua Oigara has said that the plan to acquire the National Bank of Kenya was not rooted on the problems the latter was facing.
Speaking on Thursday during KCB’s release of the 2019 financial year results, Oigara said that KCB decided to buy NBK because it was a viable business opportunity. NBK was on the verge of collapsing before KCB expressed interest to acquire it.
The problems NBK were facing had a huge risk on the entire banking sector and not just the bank. NBK was having challenges in meeting its capital requirement and that had an effect on its core business.
In fact, former Treasury CS Henry Rotich had warned that if KCB did not buy NBK out, then it would have led to negative ramifications in the entire banking sector in the country. KCB was the only solution to the National Bank’s problems as the Central Bank of Kenya (CBK) was even pushing for the merger.
However, according to Oigara the acquisition of the National Bank was not because of the bank’s problems. Even though it was important for the banking sector that NBK be saved, KCB decided to buy out the bank because they saw a viable opportunity.
“We were looking at National Bank in terms of the numbers, branches, customers and system models and decided that it would be a good opportunity for KCB to grow,” noted Oigara, “If you ask me today if I would buy NBK today then the answer will be Yes.”
“If you want to buy a business then you should buy one where there is a potential of value,” he added.
KCB First Financial results After NBK Acquisition
The NBK acquisition is already proving profitable for the largest bank in Kenya. The National bank has steered KCB to recording a 5% jump in its net profit to hit Ksh 25.2 billion for the year ended December 31st, 2019.
Oigara attributed the jump in profit to the acquisition of the National Bank, which led a 28% growth in customer deposits.
“We have seen our customer base increase over the last year, now standing at 22.8 million customers. Our branch network has also improved to 342 branches across the region given the successful acquisition of National Bank,” Oigara said.
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The bank’s total assets surged by 26% to Ksh 899 billion from Ksh 714 billion in 2018, driven by loan book’s growth, which hit Ksh 535.4 billion. Mobile loans advanced increased by Ksh 212 billion from Ksh 54 billion in 2018.
During the financial year, the bank reports that 97% of its transactions were performed outside the branch.
The ratio of non-performing loans to total loan book increased to 10.9%; 7.4% excluding that of the National Bank. This led to provisions for impairment increased to Ksh 8.9 billion from Ksh 2.9 billion.
The gains made from the acquisition gains were however diluted by higher provisions for loan loss at National Bank.
National Bank posted Sh1.9 billion in loan loss, compared to Sh185 million the previous year, effectively hurting the bottom-line. Consequently, the Bank posted a loss after tax of Sh302 million for the period.