Data Hub

Inside meteoric rise of NCBA to a tier one lender

ncba

NCBA signage after the merger of CBA and NIC on October 15, 2019. FILE PHOTO | NMG

BDgeneric_logo

Summary

  • Just two years after the NIC Bank and CBA Bank merger, NCBA is now the largest lender by customer base.
  • By the time of the merger, the Kenyatta family controlled 24.9 percent of CBA through an investment vehicle called Enke Investments Limited.
  • NCBA chief executive John Gachora has dismissed critics who attribute its meteoric rise to the current regime.

One of the biggest mergers in the past three years in Kenya has been what created NCBA Bank #ticker:NCBA , whose swift growth has made it the lender to watch.

Just two years after the NIC Bank and CBA Bank merger, NCBA is now the largest lender by customer base.

By the time of the merger, the Kenyatta family controlled 24.9 percent of CBA through an investment vehicle called Enke Investments Limited.

Other shareholders in the bank are billionaire businessman Naushad Meralia linked to Yana Investments that owned 11.14 percent, Ropat Nominees (22.5 percent), Ropat Trust (5.37 percent) and Livingstone Registrars with 19.9 percent. The rest are held by other institutions and individuals.

On the other hand, NIC was owned by the Ndegwa family through First Chartered Securities with 15.84 percent, ICEA Asset Management Ltd, also partly owned by the family, had 9.16 percent and Livingstone Registrars with 8.73 percent among other

This saw a link between two big families and the same investor on the entity.

NCBA chief executive John Gachora has dismissed critics who attribute its meteoric rise to the current regime.

Mr Gachora says the biggest investment is in digital lending where the bank has cast its nets to serve over 50 million customers, making NCBA Group the largest banking entity in Africa.

Having combined with a big asset financier, NCBA has emerged as one of the biggest beneficiaries in infrastructural and private construction projects, and asset financing.

The lender, listed on the Nairobi Securities Exchange, is the fourth-largest in Kenya with a Sh562.63 billion asset base in the nine months to September, an 8.4 percent growth compared to a similar period last year.

It follows Equity Group #ticker:EQTY (Sh1.18 trillion) as the pacemaker, KCB Group #ticker:KCB  (Sh1.12 trillion) and Co-op Group #ticker:COOP (Sh592.89 billion.)

The merger resulted in more than doubling of net earnings in 2019 at Sh7.84 billion, from Sh3.24 billion registered by NIC Bank in 2013, which held 4.17 percent market share while CBA Bank was at 5.12 percent at the time.

NCBA had a market share of 9.7 percent by December last year, dropping from 10.1 percent in 2019 due to pandemic. The lender reported Sh4.57 billion in net profit that year.

The Kenyattas have a 13.2 percent stake in NCBA while the family of the late Phillip Ndegwa owns 11.75 percent.

“It’s important to note we are two-year-old. Two years ago there was no NCBA,” said Mr Gachora in an interview with Business Daily, adding that the bank is no government favourite.

ncba-ceo

NCBA Group Managing Director John Gachora. FILE PHOTO | NMG

“It would be true if we were banking the government. If you look at our customer base it’s not government as you would see in other banks. We have never seen a directive saying open an account at NCBA...”

He also credits the growth to a good brand, strategic growth and its workforce.

“Today the bank is known everywhere in Kenya and East Africa. There is also brand beauty that we have done. A lot of work and investment has gone to that.”

The bank recruited 340 staff this year out of which 220 are permanent employees, almost overturning a lay-off move last year. The lender has opened seven new branches in Nyeri, Karatina, Embu, Ruiru, Kakamega, Bungoma, and Kericho this year.

It planned to open 15 branches in 2021 to be utilised as sales points, advisory, brand visibility and seller.

The lender also seeks to expand its operations with physical branches in Kiambu, Ngong, Naivasha and Gikomba, to increase customer base and deposits mobilisation targeting the retail and SME clients.

The lender spent Sh742 million on a voluntary early retirement programme in 2020 that saw the exit of 130 employees amid the pandemic.

The recruitment has pushed the staff costs up by 10.8 percent to Sh5.89 billion compared to a similar period last year.

The bank has been focused on lending through digital products including Fuliza, Mshwari and Loop, minting revenues through fees and interest, just like most local banks.

The bank lent over Sh423 billion in the nine months to September through Fuliza (Sh346 billion) Mshwari (Sh66) and the rest distributed between Loop, Mokash Uganda, Mokash Rwanda and M-Pawa in Tanzania.

“Digital lending is important to us in a number of ways. From a financial perspective, it is quite remunerating. We get to play a role in financial inclusion.

There are savings from people who put aside small amounts like Sh30 to Sh3,000 from small businesses, beginners and even college students, giving us a lot of satisfaction,” he adds.

The bank has partnered with South African-based telco firm MTN in Ivory Coast and Bridge Bank to dominate in some markets outside Kenya.

Mr Gachora said they are still looking for other partnerships in Africa.

“From a digital perspective, we are always looking for partnerships. I cannot disclose the ones that we are working on. We view our digital business as our best leader to enter into new markets,” he said.

“We are speaking with a lot of other partners in those countries. We try to go with the strongest telco where we don't have a bank to work with.”

Running on with asset financing as a strong business segment from NIC Bank, NCBA controls about 35 percent of the market.

It has partnered with Simba Corp, Toyota Kenya and Tata Africa being among the biggest beneficiaries of vehicle financing for construction trucks, commercial and personal vehicles on the backdrop of government infrastructural projects, back-on-track sectors like SMEs, agriculture and transportation.

“Every 10 cars on loans on road, four of them are financed by NCBA across the country,” Mr Gachora said.

[email protected]