NIC Bank has bought out nearly all minority shareholders of its stockbrokerage unit in a transaction that values NIC Securities at over Sh456.2 million.
The lender said it raised its stake in the subsidiary to 99.93 per cent in December from 91.34 per cent in 2009.
NIC first bought a 57 per cent stake of stockbrokerage firm Solid Investment Securities in 2007.
“Through direct buy-out, the group further increased its shareholding in the subsidiary (NIC Securities) to 99.93 per cent in 2013,” NIC Bank said in its latest annual report.
The minority shareholders were paid a total of Sh17.8 million for the latest buyout.
At the time of sale Solid Investment was majority owned by among others retired civil servant Kithinji Kiragu.
NIC valued its new majority equity in the brokerage firm at Sh456.2 million, representing the actual cost of acquisition excluding goodwill. NIC’s buyout of the minority shareholders signals its intention to fully acquire the profitable subsidiary.
The bank has steadily increased its stake in the brokerage firm by participating in rights issues and direct buyouts of the founders.
Minority shareholders in NIC Securities now have a combined stake of 0.07 per cent stake valued at Sh306,000 as of December.
NIC says the broker posted a profit before tax of Sh47 million in the year ended December, representing a 52 per cent rise compared to Sh31 million the year before.
The broker’s performance is expected to improve by tapping the distribution network of its parent firm including bank branches.
“NIC Securities will use the Group’s extended network and is set to increase its equities trading share of the market,” said NIC in a statement.
More banks are acquiring or starting stock brokerage units in pursuit of a financial supermarket model in which they can offer customers diverse services under one roof.
These include credit, money transfer, investment advisory, and securities trading.
Kenya’s largest retail bank Equity last year acquired collapsed broker Francis Thuo & Partners Limited for a reported Sh150 million giving it a seat at the Nairobi Securities Exchange.
The buyout is also part of NIC’s strategy of consolidating its key subsidiaries spread across the region. The firm invested Sh349.3 million last year to raise its stake in NIC Bank Tanzania to 68.97 per cent through a rights issue.