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The Competition Authority of Kenya has given the green light to yet another bank acquisition in Kenya. The Authority approved the acquisition of 93.57 per cent of Transnational Bank by Access Bank PLC, a Nigeria-based financial institution.
This comes hot on the
heels of the listing of new shares by NCBA, the new product of NIC Bank PLC and
Commercial Bank of Africa merger. The listing has underlined the benefits of
mergers in the financial sector.
Although few in between in
the past two years, the Central Bank of Kenya, Governor Patrick Njoroge said
the country will witness
more mergers and acquisitions in the sector.
In the last Financial Sector
Stability report, the Central Bank intimated that mergers bore more fruit in
terms of profit for the merged entity.
“Despite the decline in
profitability in 2014 – 2018, banks that merged are more profitable than those
that consolidated through acquisition,” the report said.
It added that “While
mergers impact organizational culture and business models, leading to more
efficiency and profitability, acquisition may not necessarily be motivated by
integration of business model and organizational values. The new entity after
acquisition may experience organizational frictions, thus undermining
Acquisitions were also
motivated by achieving efficiencies that Tier 3 banks or microfinance institutions
had, the report noted.
Whereas merges and
acquisitions are strategies bank managers adopt to increase profitability, the
regulatory perspective is that it enhances stability of the resultant entity
and the entire banking sector.
“The benefits of banks
consolidating include; improved resilience to shocks given higher capital
buffers lower supervisory and compliant costs. The stability benefits of
consolidation in the banking sector have informed mergers and acquisition,
especially after the liberalisation of the financial sector since 1990-2018,”
the CBK stated.
Kenya had twenty-eight
(28) mergers in 1990’s, ten (10) in 2000’s and three (3) in 2010’s. In
addition, there were two (2) acquisitions in 2000’s and six (6) completed
Already in 2019, KCB’s
takeover of National Bank of Kenya, NIC and CBA mergers and latest
Transnational Bank takeover by Access Bank PLC shows a continuing trend that is
not about to halt.
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