KCB joins Equity in plans to form holding company

KCB Group has become the third Kenyan bank to craft a holding company for running subsidiaries, including regional offshoots.

The Nairobi bourse-listed lender is set to seek shareholders’ approval at the upcoming annual general meeting to start the process that will see KCB Bank Group owned by a special vehicle.

This will make KCB the second listed bank to be owned by a non-operating holding company after mid-sized lender I&M Bank, that is a wholly owned subsidiary of I&M Holdings Ltd.

Equity Bank has also announced plans to set up a non-bank financial institution to own its subsidiaries.

“Subject to obtaining all the required approvals, a non-operating holding company (will) be formed in accordance with the recommendations of the board,” read KCB’s notice to shareholders.

READ: Equity hunts for top executives for holding company

The holding company will oversee the KCB Kenya and its regional units in Uganda, Tanzania, Rwanda, Burundi and South Sudan. Kenya’s largest bank also has an investment banking arm called KCB Capital.

Kenya’s banking sector regulator has developed guidelines to allow special entities to own more than 25 per cent of the share capital of a bank.

The amendment was passed under the Finance Act of 2012 to allow banks to reorganise their structures and spread risks associated with subsidiaries and associated companies.

A brief by analysts at PricewaterhouseCoopers says having a banking group under a holding company is crucial in regional expansion as the law is not structured to support banking groups.

The strategy was first used by City Trust, an investment firm which owned just 7.28 per cent of I&M Bank, in a reverse takeover deal that saw it acquire all the shares in the lender and merger of the two firms.