Companies

Giro Bank profit rises to Sh452m as I&M awaits regulator acquisition nod

giro

A Giro Bank branch in Nairobi. The bank’s 2015 profit rose 12.5pc. PHOTO | FILE

Giro Commercial Bank, which is set to be acquired by Nairobi Securities Exchange-listed I&M Holdings, recorded a 12.5 per cent rise in net profit to Sh452.4 million in the year ended December.

The small lender had made a net profit of Sh395.5 million the year before, with its latest performance driven by increased lending and higher income from transactions.

I&M has proposed to fully acquire Giro which had total assets of Sh15.8 billion and total liabilities of Sh12.9 billion as of December, giving it a book value of Sh2.9 billion.

Giro has seven branches in the country and will be merged under I&M’s banking business following the acquisition. I&M has not disclosed the value of the transaction that will see it inherit about 9,000 customers from Giro.

“Given similarity in strategy (SME and retail focus), we think the acquisition will benefit I&M Holdings on the side of branch expansion given that plans were underway to increase its network,” Standard Investment Bank (SIB) said in a statement.

“Overall however, I&M will need to improve Giro’s cost efficiency as well as mobilisation of non-interest revenue in order to bring it at par.”

SIB noted that the two banks share the same customer base of SMEs and middle to high-end retail. Giro focuses on short term lending with over half of its loan book maturity of less than one year.

I&M is awaiting regulatory approval from the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) to close the transaction.

READ: I&M Holdings in deal to acquire Giro Bank

The listed company said it was attracted to Giro because it has a good loan book and strategically positioned branches, with a mix of current and savings accounts.

Though the shareholding structure of Giro Bank has not been made public, the lender is associated with the Gidoomal family. The chairman of the bank is C.J Gidoomal, its chief executive is Sanjay Gidoomal while Prem Gidoomal is a non-executive director.

Central Bank recently suspended issuance of new operating licences in the country but left the door open for mergers, acquisition and amalgamation.