Banking group I&M Holdings has completed the buyout of Giro Commercial Bank after receiving regulatory approvals for a transaction that was first announced in 2015.
The Central Bank of Kenya (CBK) announced the conclusion of the acquisition Friday, adding that Giro has now ceased operating as an independent licensed entity after its integration into I&M Holdings’ local unit I&M Bank.
“The Central Bank of Kenya announces that I&M Bank has acquired 100 per cent of Giro Commercial Bank, effective February 13, 2017,” the regulator said in a statement.
“Consequently, effective February 13, 2017, GCBL has ceased to be a bank licensed by CBK, and its rights and obligations have been taken up by I&M Bank. All Giro stakeholders … depositors, employees, and creditors—continue their relationship with I&M Bank.”
I&M finished the takeover after a series of approvals from regulators including Treasury Secretary Henry Rotich on January 27 and the CBK on October 27, 2016.
The deal has seen I&M inherit seven Giro branches and the combined entity now gives the Nairobi Securities Exchange-listed firm a five per cent market share in Kenya.
Completion of the deal comes in the wake of controlled interest rates starting September last year, a legislative change that has cut the value and earnings of local banks.
Declining share price
Listed banks including I&M have seen their share prices fall significantly as investors reacted to the controlled margins in the institutions’ mainstay lending business.
Owners of Giro have, in particular, taken a hit after being allotted 21 million I&M shares whose Friday market price of Sh79.5 is a third lower than the average of Sh119 at which the deal was priced.
They also received Sh2.5 billion in cash as half of the total consideration in the cash-and-stock deal.
Giro Bank was associated with the Gidoomal family including Chandan Gidoomal, Prem Gidoomal and Sanjay Gidoomal who have held board and executive roles at the lender.
I&M had said the acquisition will result in annual cost savings of approximately Sh60 million in addition to Giro’s estimated annual profit before tax of approximately Sh500 million.
Small banks have suffered the most from the Banking (Amendment) Act 2016 which sets the floor for deposit rates at 70 per cent of the Central Bank Rate and a ceiling for lending rates at four percentage points above the benchmark rate.