Co-op Bank signals intention to acquire Jamii Bora
By Dominic Omondi | March 12th 2020
Co-operative Bank has set sights on fully acquiring Jamii Bora Bank as competition in the banking sector intensifies.
The lender’s board has already given a nod for a discussion that would lead to 100 per cent acquisition of the Tier 3 bank.
“The board of directors of Co-operative Bank of Kenya Ltd has approved the progression of discussions with Jamii Bora Bank Ltd which, if successful, would lead to the Co-operative Bank acquiring the 100 per cent shareholding in Jamii Bora Bank,” said the lender’s company secretary Samuel Kibugi in a statement yesterday.
Central Bank of Kenya (CBK) said the proposed acquisition was subject to regulatory approvals.
Because Co-operative Bank is listed at the Nairobi Securities Exchange, the deal will have to also get the green light from the Capital Markets Authority.
Mid last year, there were reports that Jamii Bora was also being eyed by Commercial Bank of Africa (CBA) - which has since merged with NIC Bank to form NCBA Bank. NCBA Bank is said to have made a cash offer of Sh1.4 billion for this buy-out.
The acquisition of Jamii Bora, if successful, will push Co-operative Bank’s total assets to Sh462.2 billion - bringing it closer to its nearest competitor, NCBA Bank.
It was ranked four out of 39 banks in terms of market share as at December 31, 2019, with a market share of 9.63 per cent, behind KCB Group, Equity Bank and NCBA Bank.
NCBA leapfrogged Co-operative Bank to become the third-largest bank in asset-size with holdings of Sh487.8 billion.
There have been numerous mergers and acquisitions in the financial sector, with KCB Group snapping up National Bank to cement its position at the top.
CBK has been pushing for natural consolidation, noting that mergers and acquisitions are beneficial in any economy.
It stated that mergers and acquisitions create more resilient and competitive institutions.
“CBK welcomes the transaction which will diversify the business models of the two institutions and enhance the stability of the Kenyan banking sector,” said the financial regulator.
Co-operative Bank is one of the nine largest banks in the region with an asset base of over 450 billion.
The bank is predominantly owned by the over 15 million members of the Kenyan co-operative movement.
The publicly listed lender made a net profit of Sh10.9 billion in the third quarter of 2019 compared to Sh10.3 billion the previous year.
Co-operative Bank will be hoping that cash-strapped Jamii Bora will leverage on its asset base and technical expertise. The bank, which has a presence in South Sudan, is keen on challenging for the top-spot in Kenya.
CBK noted that Jamii Bora, which was established in 2010 after the acquisition by City Finance Bank Ltd, was ranked 38 out of 39 banks in terms of market share as of December 31, 2019.
It has a market share of 0.12 per cent with 17 branches across the country.
Equity Bank has also been on an acquisition spree, albeit most of it has been of foreign banks.
In April last year, Equity announced it would acquire Atlas Mara stakes in banks in Rwanda, Zambia, Mozambique and Tanzania.
Later on September 9, Equity announced it was in talks with some of Banqué Commerciale du Congo’s shareholders to buy a controlling stake for cash.
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