The Treasury has backed KCB’s proposed buyout of the cash-strapped National Bank of Kenya (NBK), a day after Parliament directed it to reject the deal.
The National Assembly’s Departmental Committee on Finance and National Planning, in a report tabled Wednesday in the House, had said the takeover deal undervalues NBK and is not in the best interest of workers, taxpayers, NBK staff and minority shareholders.
Acting Treasury Secretary Ukur Yatani in a statement Thursday however endorsed the deal, saying it would support the State’s agenda to strengthen the financial sector.
Mr Yatani added that the government, as a key shareholder, had been “engaged” in the process as any other shareholder.
“Since the merger process started, consultations have been ongoing with various shareholders including Parliament,” he said.
“The government is confident that these consultations will yield positive results for both KCB and National Bank in order to support the bigger government agenda of strengthening the financial sector in Kenya.”
The Central Bank of Kenya’s (CBK) had earlier warned that failure to rescue NBK would lead to its collapse.
Market regulator, the Capital Markets Authority, in a Wednesday statement said success or failure of the takeover is entirely dependent on the two banks’ shareholders.
MPs have recommended that the government seeks cash to recapitalise NBK, a feat that the Treasury has failed to achieve in the past decade pushing the bank to the brink of collapse.
“Considering submissions by stakeholders, the committee recommends that the principal shareholders (National Treasury and National Social Security Fund (NSSF), should not accept the offer by KCB on the acquisition of 100 percent shares of NBK,” stated the committee chair, Joseph Limo, in the report.
The committee has also proposed that the Treasury seeks alternative ways of funding NBK to ensure that it is compliant with the Banking Act capital ratios so as to continue lending and taking in more deposits.
“The National Bank should pursue the Rights Issue in order to raise enough capital,” states the report.
Conversion of NBK preference shares into ordinary stock has seen the Treasury and NSSF control an even bigger effective shareholding of 93.23 percent, taking them above the minimum legal threshold required for a takeover transaction to be declared successful.
The Sh5.8 billion share-swap deal is already open for acceptance by shareholders, with the offer expected to close at the end of this month.
The Treasury had thrown its weight behind the NBK takeover by KCB, saying it is the only way to save the lender from imminent collapse.
During the NBK-KCB takeover inquiry, then Treasury Secretary Henry Rotich told the committee that the merger presented an opportunity to avert risk of failure by NBK and prevent a potential banking sector crisis.