A condition imposed by Nigeria's banking regulator requiring Access Bank to exit the Democratic Republic of Congo (DRC) before it can acquire the National Bank of Kenya (NBK) from the KCB Group has frozen the buyout deal.
Fresh revelations indicate that the Central Bank of Nigeria (CBN) had placed a condition for Access Bank to sell its DRC subsidiary before completing the deal.
The exits, including a review of Access Bank’s London operations, were to inform the approval of the deal by the Central Bank of Kenya (CBK).
The delay in closing the deal, which will be valued at 1.25 times the book value, has seen KCB devise "plan B" should the deal collapse.
“I can confirm that the transaction is in place. But I can also tell you, if it ever fails, KCB has a plan. We are not short of a plan,” said Paul Russo, the KCB Group chief executive, in an interview.
“They (Access Bank) got a no objection but with a condition that they had to comply with. It was a condition for CBK’s approval and also a condition for some divestiture and I think it must be in DR Congo and London which they are at advanced stages.”
It is not clear why Nigerian authorities linked the purchase of National Bank to the divestiture of Access Bank in DRC and the review of London operations.
Access Bank has operations in 23 countries after an aggressive growth into new markets.
It is Nigeria's biggest bank by assets and in December raised $228 million in a rights offer to boost its capital above a new regulatory threshold as it embarks on an expansion plan.
The lender’s share capital — at 600 billion naira — rose 20 percent above the minimum required for international banks operating in the West African country.
The fundraising will help Access Bank, controlled by Access Holdings Plc, accelerate its expansion into new markets, including Morocco, Egypt and the US and double the share of assets outside its home market by 2027.
In Kenya, Access Bank already runs a small bank after another acquisition of Transnational Bank from the Moi family.
It is hoping to ride on NBK buyout to expand in the country and take advantage of growing trade in the region.
KCB, Kenya's second-biggest lender, bought NBK, a medium-sized lender that was then controlled by the state, in a rescue deal engineered by the central bank in 2019.
KCB had initially indicated it was invested in NBK for the long haul. However, narrowing capital adequacy ratios in the past two years may have prompted a rethink.
NBK's core capital to risk-weighted asset ratio was at 9.0 percent in December, below the minimum requirement of 10.5 percent.
“Have you ever been so close yet so far in your life? It has been that way. That being too close and not closing is equally frustrating for me because the longer transactions take, doubts check in,” said Mr Russo about closing the NBK deal.
“You know we ran the buyout of NBK by KCB, we ran the TMB acquisition in DR Congo and we also ran the BPR acquisition in Rwanda. I was leading all these transactions and so I had the experience of how long such transactions typically take.”
KCB and Access Bank signed a binding offer on the acquisition of NBK in March last year and initially expected to close the deal before the lapse of 2024.
The Central Bank of Nigeria’s push to have Access Bank quit the DRC comes amid continued struggles by Nigerian banks in the country where they have faced hurdles in adapting to the local market in an economy beset with volatile inflation, currency depreciation and liquidity crises.
The struggles witnessed by the Nigerian banks in the DRC may have prompted regulatory actions to reduce their exposure in the market.
Kenyan banks in contrast have found success in the DRC, including the KCB Group which has its largest regional operation in the country following its recent acquisition of the Trust Merchant Bank (TMB).
Equity Bank’s subsidiary in DRC posted a profit of Sh12.1 billion in 2023 while KCB’s Merchant Bank had a Sh16.8 billion profit.
The success of Kenyan banks in the DRC is partly attributable to their acquisition of stronger and more profitable brands in contrast to their Nigerian counterparts.
Equity acquired the Banque Commerciale du Congo (BCDC) -- a significant lender in the DRC -- from the family of businessman George Forrest in 2020. It added to its already existing unit of Equity Bank Congo, which was born out of the acquisition of German bank ProCredit previously.
KCB has retained NBK’s price tag at 1.25 percent of its prevailing book value, which puts the expected proceeds from the sale at Sh16.2 billion on December numbers, up from Sh12 billion a year earlier.
NBK swung back into profitability in 2024, posting a net income of Sh993 million from a Sh3.3 billion loss on the back of lower operating expenses including loan-loss provisions and staff costs.
KCB Group acquired NBK in 2019 in a buyout designed as a rescue deal and fronted by the CBK.
