Credit Bank, which is linked to the family of late politician Simeon Nyachae, has been cleared by the banking industry regulator to sell a 20 percent stake to a Mauritius-based private equity fund in the latest deals that have seen politicians and investors cash out of struggling lenders.
The Central Bank of Kenya (CBK) said in a Monday notice that the equity fund, Shorecap III, LP will acquire the stake on June 15, 2023, following the approval of the deal on April 24.
The Competition Authority of Kenya had also cleared the deal in November last year.
“CBK welcomes this transaction that will diversify and strengthen the resilience of the Kenyan banking sector,” said the regulator in a statement. The CBK did not disclose the value of the deal.
The Nyachae family, through Sansora Group, at one point owned 21.46 percent of the small lender. The current shareholding is not clear.
A company search by the Business Daily showed Credit Bank has a nominal share capital of Sh7.5 billion and has Jay Rajnikant Karia and Ketan Devram Morjaria as directors who also hold stakes of 707,313 shares and 1.43 million shares respectively.
Nyachae at one time served as the bank's chairman while his wife Grace Wamuyu Nyachae, who worked in civil service for 11 years, serves as a director.
Eric Nyachae, a son of the former Finance minister, serves as the executive officer in charge of business and strategy at the bank.
Leon Nyachae, another one of the Nyachaes, serves as a Credit Bank director and is also the managing director of Sansora Group where Ms Wamuyu serves as a board member.
The lender is yet to disclose details of the deal or how it will be using the proceeds. The lender closed December in breach of capital-related ratios that require more capital to correct.
The core capital to total risk-weighted assets ratio was at 7.4 percent in December against the CBK required minimum of 10.5 percent while the liquidity ratio was at 20.5 percent, being just 0.5 percentage points above the permitted minimum.
Shorecap is owned by ShoreCap III GP Limited, African Development Bank Group, CDC Holdings Guernsey Limited, European Investment Bank, KfW Development Bank and Oesterreichische Entwicklungsbank AG.
The private equity fund’s business model focuses on investing in inclusive financial services in Asia and Africa. Shorecap will be assigned 7.3 million shares in Credit Bank.
Credit Bank was licensed by the CBK as a non-banking financial institution in 1986 under the name Credit Kenya Limited and converted to a fully-fledged commercial bank in 1995.
The lender has 17 branches across the country and mainly serves small corporates and micro, small and medium-sized enterprises (MSMEs).
Credit Bank posted a Sh1.68 million net loss in the financial year ended December 2022 from the Sh138 million net profit posted in the previous year.
As of March 31, 2023, the CBK categorised it as a small bank with a market share of 0.5 percent in an industry that has 39 lenders.
Credit Bank shareholders in 2018 approved discussions with potential investors interested in buying its shares.
The bank last year announced it had signed an agreement with Shorecap III, LP for the sale of a 20 per cent stake, pending regulatory clearance.
The past 10 years have witnessed a rise in bank deals in the Kenyan market, with CBK supporting the move as a way of injecting stability.
A Mogadishu-based lender recently acquired a 62.5 percent stake in the First Community Bank for Sh2.8 billion.
Egypt’s Commercial International Bank (CIB) paid $40 million (Sh5 billion) to acquire the remaining 49 percent stake in Mayfair Bank in May 2020, giving it full control of the bank after acquiring 51 percent earlier.
Nigeria’s Access Bank in February 2020 acquired Transnational Bank and was on course to buy Sidian Bank but the deal collapsed.
KCB Group in September 2019 acquired the National Bank of Kenya while I&M Bank in June 2016 got Giro Commercial Bank. Cooperative Bank of Kenya bought Jamii Bora in August 2020.
SBM, which had in 2016 bought Fidelity Commercial Bank, acquired Chase Bank in 2018.
