Nyachae linked Credit Bank sells 20pc stake to US private equity fund

A section view of Credit Bank located along Koinange Street on September 16, 2022. [Edward Kiplimo,Standard]

Credit Bank shareholders will loosen their grip on the tier three lender after selling a fifth of the stake to a US-based fund.

ShoreCap III, a multinational private equity (PE) fund managed by US-based Equator Capital Partners, is set to acquire a 20 per cent stake in the lender with links to the Nyachae family.

The deal is pending regulatory approvals, according to regulatory filings to the Competition Authority of Kenya (CAK) published on Friday.

"The Competition Authority has authorised the proposed acquisition of 20 per cent of the share capital of Credit Bank Plc by ShoreCap III, Lp," said CAK Director General Wang'ombe Kariuki in a gazette notice dated August 16.

Historical data

It was not immediately clear how much ShoreCap III is set to inject into Credit Bank, but historical data shows that the fund typically invests nearly Sh1 billion in target firms.

The deal will mark the first Kenyan deal by ShoreCap III, which has offices in Nairobi, Abidjan, Johannesburg besides Chicago.

It will also be the latest major change in the shareholding structure of Credit Bank, where the late former powerful politician Simeon Nyachae's family has a significant stake.

Mr Nyachae formerly served as the bank's chairman while his wife Grace Wamuyu serves as a director. The Nyachae family, through Sansora Group, directly owned 21.46 per cent of the small lender.

Eric Nyachae, a son of the former Finance minister, serves as executive officer in charge of business and strategy.

The lender started off in 1986 as Credit Kenya Ltd, a non-bank institution. It became a fully-fledged commercial bank in 1995.

The bank has sixteen branches dotted across the country and is ranked 26th in size, according to data from the Central Bank of Kenya.

Its total assets grew by 12 per cent to Sh25.97 billion by December 2021, up from Sh23.21 billion in December 2020.

Customer deposits grew by 15.4 per cent to Sh20.36 billion in December last year from Sh17.64 billion in the previous year.

"In line with our 2021-25 Strategic Plan, our roadmap to success will no doubt take us closer to realising consistent, rapid results anchored on customer-centricity and innovation," said Chief Executive Betty Korir on the financial results.

"Our main priority going into the next financial year is to continue leveraging our existing digital infrastructure and to pursue financial inclusion, which is essential to ensuring sustainable growth in an ever-changing financial and operating landscape."

The SME-focused bank said earlier it had lent over Sh14 billion to more than 5,000 small enterprises to date, spanning across all sectors of the economy with a special focus on manufacturing, building and construction, trade businesses, agriculture and health.

ShoreCap III Fund has been eyeing to expand access to financial services in Sub-Saharan Africa backed by a Sh18 billion financial war chest.

With a target capitalisation of $150 million (Sh18 billion), ShoreCap III Fund said earlier it will provide growth "capital and capacity building to inclusive financial institutions."

The PE fund earlier said it targets small-sized business-focused banks, microfinance institutions, insurance providers, leasing companies, housing finance companies and financial technology providers.

Expand access

It said then it will focus exclusively on Sub-Saharan Africa and intended to invest in 15 financial institutions with an average ticket size of $8 million (Sh960 million).

"The ultimate objective of the fund is to expand access to affordable and responsible financial products and services for the underserved market as well as institutions looking at significant business and geographic expansion through the use of innovative technologies," a statement from ShoreCap said.

The financial services sector has been tipped for a wave of consolidations, mergers and acquisitions.