What Kenya CBA-NIC merger means for banking in Tanzania

Dar es Salaam. The Fair Competition Commission (FCC) plans a meeting on Thursday over the proposed merger between two Kenya-based commercial banks-- Commercial Bank of Africa (CBA) and NIC Group Plc (NIC) both of which have subsidiaries in Tanzania.

This comes after the Central Bank of Kenya (CBK) on Friday, issued an official statement saying it has agreed on the merger between the two lenders effective October 1, this year.

“[The merger in Kenya is]…under the section 13(4) of the banking act, and approval by the cabinet secretary, national treasury on September 20, for the merger under section 9 of the Banking Act,” reads a part of the statement.

Following the changes, all subsidiaries will operate under a Non-Operational Holding Company, NCBA Group Plc.

Speaking to The Citizen over the telephone yesterday, FCC director-general John Mduma said the commission so far has no objection to the proposed merger.

“We normally hold a meeting to discuss such changes,” Dr Mduma said. He added: “The two banks are too small in terms of competition with the local banks. Therefore, their merger will not affect the country’s banking industry.”

When reached for comment on the matter, Bank of Tanzania (BoT) Bank Supervision manager Sadati Mussa said: “These two banks in Tanzania will also merge to form a single entity”.

He added: “In view of the two banks’ current financial standing, BoT is looking forward to having a stronger merged banking entity that will further enhance the stability of banking industry and the financial sector at large.”

On August 9 this year, the FCC received merger notification to the effect that NIC Group Plc, a company incorporated in Kenya with its operating subsidiary in Tanzania NIC Bank Tanzania Limited intends to acquire the entire operation of CBA.

In a statement on Friday CBK further explained that the merger aimed at strengthening the institutions’ financial standing. CBA and NIC are leveraging on their combined market share of 5.6 per cent and 4.3 per cent respectively.

Furthermore, CBK stated that all account holders, depositors, employees, creditors and other stakeholders of the existing institutions should deal with NCBA bank Kenya Plc and NCBA Group PLC.

The CBK statement further indicated that CBA has been operational for over 50 years and is wholly owned by a group of institutional and individual investors with extensive business interests in Kenya and East Africa.

It has invested in both banking and non-banking subsidiaries in Kenya, Rwanda, Tanzania, and Uganda.