What merger of NIC, CBA banks means
Dar es Salaam. Authorities have officially approved the merging of two banks in a landmark development that will create a new half-a-trillion-shillings lender in the market.
NIC Bank Tanzania Limited (NIC) and the Commercial Bank of Africa (Tanzania) Limited (CBA) said in a statement yesterday that they have received all regulatory approvals to merge and start operations as ‘NCBA Bank Tanzania Limited’ with effect from Wednesday, July 8, 2020. The merger brings together assets and liabilities of the two banks into a single entity, resulting in the creation of a Tier-2 lender with assets totalling Sh508 billion, available figures show.
Until March 31, 2020, CBA had total assets amounting to Sh350.8 billion in value. It held Sh194 billion in customers’ deposits, while a total of Sh191 billion had been issued out in loans to its clients, according to the bank’s financial statement for the first quarter of 2020.
The bank had Sh43.3 billion in net shareholder funds. Until March 31, 2020, the ratio of CBA’s non-performing loans (NPLs) to total gross loans stood at 14.9 percent.
The bank, which has six branches manned by a total of 162 employees, registered a loss of Sh24.6 billion in 2019, up from Sh13.2 billion in 2018.
On the other hand, NIC Bank had total assets worth Sh157.37 billion as of March 31, 2020. It had issued a total of Sh76.5 billion in loans, advances and overdrafts - and held a total of Sh87.7 billion in customers’ deposits.
It had shareholder funds to the tune of Sh17.9 billion as of March 31, 2020, while the ratio of its NPLs to total gross loans stood at 24 percent.
It’s net loss narrowed to Sh1.47 billion as of March 31, 2020, from Sh3.2 billion on March 31, 2019.
The merger in Tanzania comes after almost nine months since the Central Bank of Kenya (CBK) approved integration of the Commercial Bank of Africa Ltd and the NIC Group effective from September 30, 2019. Following the merger, all subsidiaries started operating under a Non-Operating Holding Company - NCBA Group PLC - on October 1, 2019,.
NIC and CBA announced in a statement yesterday that the merger will be through acquisition of a majority of the assets and all the liabilities from the latter by the former.
“Implementation of the merger shall be through the transfer of assets and liabilities, which have been approved by the Bank of Tanzania and the Fair Competition Commission,” the statement reads in part.
Once the merger is completed, the new entity - NCBA Bank Tanzania Limited - will assume all liabilities, obligations and rights of the assets transferred from CBA.
NCBA Bank Tanzania Limited will also assume all existing CBA customers and creditors.
Both CBA and NIC are in the process of concluding other regulatory conditions.
NCBA Bank Tanzania Limited will be part of the NCBA Group PLC, which was formed on Tuesday which, according to the CBA (Tanzania) Limited, chief executive officer, Gift Shoko, will symbolise the building of a bigger and stronger institution to support Tanzania’s economy.
The two firms will now have one month in which to harmonise their systems for customers to enjoy seamless services across the board.
As part of the regional integration of the NCBA Group the businesses merger in Rwanda was completed earlier in the year - and is expected to be completed in Uganda by the end of this quarter.
Mergers and acquisitions (MAs) have been common in Tanzania’s banking industry during the past three years.
Apart from the BoT’s regulatory measures to merge certain local banks over capital inadequacy, some mergers have been purely necessitated by the need to change the landscape, and improve the banking sector in Tanzania, through consolidating assets and deposits, as well as improving capital bases.
In August 2018, the sector witnessed the merger of Twiga Bancorp and Tanzania Women’s Bank (TWB) into TPB Bank Plc, after the two former banks failed to meet the capital adequacy as required by the regulator.
Two weeks ago, TPB Bank Plc officially joined the elite group of first-tier banks when its assets crossed the Sh1 trillion mark, following its acquisition of assets and liabilities of the TIB Corporate Bank.
On January 15 last year (2019), BoT authorized the merger between Azania Bank and Bank M Limited to create yet another first-tier bank.
