National Bank confirms Treasury push for its merger

National Bank of Kenya (NBK) has confirmed that the Treasury wants it to merge with other State-owned lenders, sending a strong signal that the privatisation bid that has stalled for over seven years could delay even more.

The bank on Tuesday acknowledged receiving instructions from the Treasury to draw up privatisation options, including a possible merger with other government-owned banks.

“We received a letter from the Treasury instructing us to undertake a due diligence in collaboration with a consultant that would generate different privatisation scenarios including mergers,” said NBK managing director Munir Ahmed at a media briefing on Tuesday.

Reports of Treasury’s push for NBK’s possible merger with Development and Consolidated banks attributed to Treasury secretary Henry Rotich first emerged in April.

The option of selling a majority stake of NBK to a strategic partner who can inject capital and boost managerial expertise at the bank has also been on the table.

“We have fully co-operated with the Privatisation Commission and attended every meeting they have called us for,” said Mr Ahmed.

On Tuesday’s media briefing was attended by NBK’s full board including representatives of the two biggest shareholders, the Central Organisation of Trade Unions secretary-general Francis Atwoli (for NSSF), and Beatrice Gathirwa (for Treasury).

EARLIER: National Bank boss not aware of merger plan

The Treasury, which owns 22.5 per cent of the bank, in July 2008 gave the go-ahead for NBK’s privatisation in a process that would see the entry of a strategic investor and off-loading of additional shares on the bourse.

NSSF, which owns 48 per cent of the lender, was also to sell 23 per cent of its shares in a concerted bid by the top shareholders to shore up the capital base of the bank which was at one point a top-tier lender as per the Central bank of Kenya’s classification.

This grand plan has failed to materialise leaving NBK in a quandary especially regarding the Sh5.7 billion preferential shares that both NSSF and Treasury hold.

The preference shares, that earn an interest rate of between zero and six per cent annually, on NBK’s books have scared off potential investors who would have been interested in putting money in the lender with an eye on dividend earnings.