Nigeria’s financial powerhouse, Access Bank, looks to shake up Africa’s banking landscape by acquiring the National Bank of Kenya (NBK).
The bold and highly risky move would include a $100 million offer for KCB Group’s subsidiary, which is 1.25 times NBK’s book value.
The bank has been a bottomless pit for KCB, which has pumped $105.4 million into it over the past five years but remains in breach of core and capital ratios.
The challenges of cleaning up NBK, which is grappling with a 25.3% ratio of non-performing loans, have weighed heavily on KCB and have contributed to a 15% drop in pretax profit to $367.4 million last year for the group.
“KCB has struggled to turn NBK around, which needs additional recapitalization. It wants to let go of that burden,” says Eric Musau, head of research at Kenya-based Standard Investment Bank.
Access Bank, which will acquire 100% of NBK subject to regulatory approvals, does not see a burden. In its view, NBK represents a significant milestone in its determination to build scale and join the league of Tier 1 lenders in the highly competitive Kenyan market.
“Tier 1 banks dominate profitability. Building scale will catapult Access Bank to that club,” says Musau.
Access Bank, which entered the Kenyan market in 2020 after paying $12.8 million for Transnational Bank, currently has a network of 22 branches. With NBK’s 85 branches, it will reach 107 branches countrywide.
Apart from branches and a sizable retail clientele, Access Bank also will acquire high-profile government and state-owned enterprise accounts; prior to KCB’s acquisition, NBK was largely under the state’s control.
The deal also moves the lender closer to achieving its ambitions of dominating critical trade corridors, essentially positioning it strategically to address the African Continental Free Trade Agreement’s financial needs. Still, signing a binding agreement is one thing, but actualizing it is a different matter. Last year, Access Bank’s plans to acquire a majority stake in Sidian Bank, a Tier 3 Kenyan lender, fell through.
