New shares from the merged NIC Group and CBA Group started trading yesterday at the Nairobi bourse, valuing the Kenyatta family stake at Sh6.6 billion.
The combined business of the two banks, which is now known as NCBA, climbed three places to rank sixth among the 10 banks listed on the Nairobi Securities Exchange (NSE) with a market valuation of Sh50.3 billion after listing the additional shares.
The additional 793.8 million new shares belonged to owners of CBA Group including members of the Kenyatta family and billionaire businessman Naushad Merali with listing status opening the owners of the additional stock to public scrutiny.
The Kenyattas control about 13.2 percent of the new entity, a level of ownership that slightly surpasses the 11.75 percent stake that the family of the late Phillip Ndegwa owns in the merged business.
The 13.2 percent is valued at Sh6.6 billion based on NCBA’s closing price of Sh33.65, up 5.3 percent on Friday’s close price of Sh31.95.
This valued Mr Merali’s 2.9 percent stake in the merged entity at Sh1.45 billion with the listing of the new shares offering owners of CBA Group a platform to trade in their stocks.
The transaction happened though a share swap between the two banks, with current NIC Group shareholders owning 47 percent of the merged entity and CBA shareholders, including the Kenyatta family, owning 53 percent of the merged entity.
NIC Group has remained listed with the transfer of the CBA unquoted shares into the merged entity.= The new shares helped NCBA overtake Stanbic Holdings, I&M Holdings and DTB Group whose market value stood at Sh39.3 billion, Sh37.9 billion and Sh32.1 billion respectively.
The additional stocks, combined with a rally in NCBA’s share price, more than doubled the bank’s market value to Sh50.3 billion from Sh22.4 billion on Friday last week when it was ranked ninth.
The lender’s volume of outstanding shares has jumped to 1.49 billion units from the previous 703.9 million units.
The merger also lifted NCBA’s combined assets to Sh476 billion based on June financial reports, ranking it third by this measure after KCB and Equity, which hold Sh859 billion and Sh638 billion respectively.
Equity remains the highest-valued bank, closing yesterday with a market capitalisation of Sh146.9 billion ahead of KCB (Sh139.7 billion) and Co-op Bank (Sh73.9 billion). StanChart’s stood at Sh67.4 billion, followed by Barclays at Sh61.9 billion.
NCBA is expected to boost its profitability going forward by cutting costs across its regional operations. Before the merger, NIC and CBA operated independent banking, stock brokerage and other businesses in Kenya and other countries, including Tanzania.
NCBA is also expected to maintain the conservative dividend payout policies that the two banks had as separate entities. NIC’s per share distributions used to stand at Sh1.25, representing a payout of a fifth of its net earnings per year.
CBA, meanwhile, gave its shareholders Sh2.09 per share or a third of the net profits.
Assuming the merged entity maintains these cash distribution levels, NCBA shareholders can expect payouts of Sh1.69 per share going forward.
NCBA chairman James Ndegwa told shareholders at the company’s annual general meeting in April that the dividend policy was unlikely to change significantly.
He added that the lender would continue to focus on retaining most of its earnings to funds its growth.
The merger is part of a flurry of deals in the local and regional banking sector as lenders seek to cut costs and gain economies of scale.