KCB Group’s #ticker:KCB move to inject Sh5 billion of capital into National Bank of Kenya (NBK) has raised its cost of acquiring the lender to Sh13 billion.
The cash, which was provided in late December, adds to 147.3 million KCB shares currently valued in the market at Sh8 billion and which were issued to former NBK owners in the deal.
The Sh5 billion is meant to recapitalise NBK, which had breached critical capital ratios for years.
The buyout has proved lucrative for former NBK shareholders including the National Treasury and National Social Security Fund (NSSF) who are booking major gains in their holdings of KCB shares.
The newly created KCB shares were valued at about Sh6.1 billion on October 4, 2019, when they were issued. A rally in the lender’s share price has lifted their paper value to Sh8 billion, resulting in a gain of Sh1.7 billion or 28 percent in just over three months.
The merger was completed by swapping one KCB share for 10 NBK shares.
With a stronger balance sheet, NBK can now take in more deposits and expand its lending, a move that is expected to help it contribute to KCB’s consolidated earnings in the coming years.
“This will in tandem lead to topline growth, which combined with the recovery of non-performing loans should lead to a dividend payout to the parent (KCB Group) in approximately two years’ time,” Standard Investment Bank said in a market brief.