Number of banks have shrunk 10 percent under Dr Njoroge’s watch

 Number of banks have shrunk 10 percent under Dr Njoroge’s watch

Central Bank of Kenya Governor Dr Patrick Njoroge’s tenure has seen the number of lenders reduce from 43 to 39 through mergers and buyouts.

Central Bank of Kenya Governor Dr Patrick Njoroge, who is set to exit the stage in June, has overseen more than 15 mergers and acquisition transactions since taking over in 2015 reducing the number of lenders from 43 to 39 over his two terms. 

The regulator has overseen 10 banking deals and five mergers and acquisitions by micro lenders, including three transactions by SBM Bank, KCB Group and Equity that have entrenched purchase of assets and liabilities instead of buying a direct stake in Kenyan lenders. 

The deals include the merger of Commercial Bank of Africa Limited (CBA) and NIC Group PLC (NIC) in September 2019; I&M Bank purchase of Giro Commercial Bank, SBM Bank takeover of Fidelity Bank and Chase Bank assets, DTB’s acquisition of Habib Bank, and KCB Group purchase of NBK and Imperial Bank books.

Further, Access Bank takeover of President Daniel Moi-linked Transnational Bank, and the most recently Egyptian lender Commercial International Bank (CIB) two transactions to fully acquire Mayfair Bank, an institution linked to politician Peter Kenneth.

Also under Dr Njoroge’s tenure, Co-Operative Bank entered into a deal to buy Jamii Bora and convert it to Kingdom Bank. Just last week, Equity Bank received the nod to take over assets of troubled Spire Bank, a lender owned by teachers’ savings unit Mwalimu National Sacco.

Dr Njoroge came into office strongly opposing the government push for consolidation in the industry through a Treasury proposal to raise core capital to Kes5 billion within three years that would have seen weak lenders either merge or sell their businesses to create stronger institutions. 

Read also: High inflation, debt darkens Kenya’s 2023 economic outlook

The MPs backed Dr Njoroge and voted against the proposal that wanted all commercial and mortgage banks raise their minimum core capital to Kes2 billion by December 2016, Kes3.5 billion by December 2017 and Kes5 billion by end of 2018.

“We do not want to force marriages, it would be a disaster,” he said. “There are many countries out there that tried to do this and the result was worse than what they started with,” said Dr Njoroge in 2015.

However, for the man who worked for 20 years at the International Monetary Fund (IMF) based in Washington DC, the first twelve months in office as CBK governor saw three lenders Dubai Bank, Chase Bank and Imperial Bank all collapse in quick succession. 

Their collapse later came to haunt Dr Njoroge with the current Treasury Cabinet Secretary Prof Njuguna Ndung’u, who is a former CBK boss, criticizing the banking sector regulator for allowing the collapse instead of rooting for mergers and acquisitions.

During Prof Ndungu’s tenure as the CBK Governor, First American Bank merged with Commercial Bank of Africa in July 2005, while East Africa Building Society merged with Akiba Bank in October the same year.

In 2008, Prime Capital & Credit merged with Prime Bank while CFC joined with Stanbic, giving rise to CFC Stanbic Bank.

Further, Savings and Loans Limited joined with KCB in 2010; City Finance Bank with Jamii Bora Bank even as Equitorial Commercial Bank merged with Southern Credit Banking Corporation.

“No bank collapsed during my time, but that does not mean there were no problems. There were problems but we had to develop interventions to save the market. There were several mergers but those mergers were actually geared towards preventing any collapse,” Prof Ndung’u told Parliamentary Select Committee during his vetting hearings last year.

It appears however Dr Njoroge learned quickly after the collapse of the three lenders spread panic and contagion effect across the banking sector, leaving the small and mid-tier lenders fighting deposit flight.

The Governor imposed a moratorium on issuing new licenses with a view to consolidate the banking sector while also urging lenders to buy existing businesses. He only approved the set up of Dubai Islamic Bank and the conclusion of the Mayfair deal by Egyptian lender CIB. 

He also changed tact by adopting a new strategy of facilitating mergers and acquisitions of struggling lenders Spire Bank, Jamii Bora, Transnational and NBK by stronger players. 



Related post