An oil exploration rig in East Africa. International banks are eying demand from the region’s oil and gas sectors. FILE PHOTO |
What you need to know:
Bank was reported to be targeting Middle East Bank (MEB) that is 25 per cent-owned by France based BNP Paribas.
MCB, the fourth largest bank in Pakistan, started the process of acquiring the Kenyan lender a year ago as it sought to follow the path of its peers who have international presence.
Pakistan’s MCB Bank has dropped a bid to acquire a Kenyan lender for undisclosed reasons.
In a regulatory notice filed with the London Stock Exchange, the bank said it concluded due diligence on a small Kenyan lender but it would not be progressing with the transaction due to what it only termed commercial reasons.
“We wish to inform you that subsequent to the due diligence, MCB has decided, for commercial reasons, not to pursue this opportunity any more,” says the lender in the notice to the LSE dated October 21.
The bank was reported to be targeting Middle East Bank (MEB) that is 25 per cent-owned by France based BNP Paribas.
MEB recorded a 62 per cent drop in profit in the six months to June compared to a similar period last year. The bank posted a Sh19 million profit this year compared to Sh50 million in June last year.
Attempts to get comments from Middle East Bank, which early this year told the local media talks on a deal were ongoing, was not successful.
“With acquisition it is difficult to tell what made them pull away; it may be the valuation,” said Standard Investment Bank’s head of research, Francis Mwangi.
MEB has an asset base of Sh6.1 billion with customer deposits of Sh4.2 billion and a loan book of Sh3.8 billion. It has four branches and is ranked as the third smallest lender by the Central Bank of Kenya with a 0.22 per cent market share.
Last year MEB return on equity was 6.9 per cent and return on assets of 1.4 per cent. This was lower than the industry average of 29.1 per cent and 4.7 per cent respectively.
Unlike other small-sized banks, Middle East Bank is not under pressure to inject additional cash so as to comply with new capital requirements taking effect in January.
MCB, the fourth largest bank in Pakistan, started the process of acquiring the Kenyan lender a year ago as it sought to follow the path of its peers who have international presence.
Kenya has been attractive to international lenders because it is the gateway to East Africa, a region that is set to be powered by mining, oil and gas sectors.
East African governments are also undertaking huge infrastructural projects, increasing the credit appetite of the State and private sectors.
International banks are seeking to exploit Kenyan lenders lack of financial strength to take on the huge loan demands of the oil and gas sector to grow businesses.
Guaranty Trust Bank of Nigeria which acquired 70 per cent of Fina Bank at a cost of $100 million last year disclosed that it was eyeing financing deals in Kenya’s nascent oil and gas and minerals sector.
Wide interest margins enjoyed by banks in the Kenya have been a major attraction for international lenders. The government has been putting pressure on banks to lower their interest rates and reduce the gap between interest they pay depositors and the price they charge borrowers.
“The Kenyan banking industry is still attractive but globally there is a lot of concentration on banks’ capital adequacy – so for them to take in more risk it has to be matched by increase in shareholders’ equity,” said Mr Mwangi.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
