KCB Group targets completing the sale of National Bank of Kenya (NBK) to Access Bank by September 30 even as the lender says the increase in minimum capital requirements for banks in Nigeria has potentially placed the transaction on the back burner of the market regulator’s focus at the moment.
Through a circular to all commercial, merchant and non-interest banks dated March 28, the Central Bank of Nigeria (CBN) revised upward the minimum capital requirements for banks in the country including Access Bank, citing the need to enhance resilience and solvency in the banking sector amidst rising headwinds.
The notice for revised capital adequacy requirements came just 8 days after KCB had announced entering a binding offer with Access Bank for the latter’s 100 percent acquisition of NBK in a deal whose valuation is placed at 1.25 price-to-book multiple, translating to about Sh13.3 billion.
For commercial international banks in Nigeria, the minimum capital requirement has been bumped up from the initial 50.0 billion naira (Sh4.1 billion) to the new requirement of 500 billion naira (Sh40.9 billion).
“The regulator (CBN) is looking at both a recapitalisation plan and the acquisition. It is public knowledge that Access Bank is doing a rights issue and so they are in the market to raise some capital to meet the regulatory requirements,” KCB Group’s Finance Director Lawrence Kimathi said.
“So, the regulator is probably going to focus a bit more on that and once they finish the capital raising, then look at the application for acquisition.”
Access Bank opened its rights issue of 17.8 billion ordinary shares on July 8 on the allotment basis of one new ordinary share for every two ordinary shares held looking to raise 343.1 billion naira (Sh28.1 billion) in net proceeds geared to enable the bank enhance its capital base and strengthen the balance sheet.
The rights issue, which was initially slated to run until August 14, 2024 was extended by one week to August 23.
KCB Group says it has made considerable progress on the deal having furnished both the central banks of Nigeria and Kenya with the requisite filings and is now expecting a no-objection at any time.
“We are at the tail end of doing the Completion Audit so everything held constant, we should be closing the deal before the end of the third quarter.”
In the half year ended June 30, NBK rebounded back to profitability reporting Sh828.7 million in net earnings compared to a loss of Sh3.8 billion in the same period in 2023.
The subsidiary, however, reported the group’s worst non-performing loan ratio at 26.7 percent with its bad debt stock standing at Sh25.7 billion.
