Cooperative Bank in talks to acquire Jamii Bora

Cooperative Bank of Kenya #ticker:COOP has opened talks to buy a 100 percent stake in Jamii Bora Bank, bolstering the listed lender’s asset base and increasing acquisitions in Kenya’s banking sector.

The bank announced on Wednesday morning that its board has given green lights for the talks which if successful would be followed by regulatory approvals to seal the deal.

“The board of directors of Co-operative Bank of Kenya has approved the progression of discussions with Jamii Bora Bank which, if successful, would lead to the Co-operative Bank acquiring the 100 percent shareholding in Jamii Bora Bank,” Co-op bank announced.

“The acquisition will strengthen both institutions leveraging on their respective well established domestic and regional corporate, public sector, retail business and the 15 million member co-operative movement.”

The development comes months after the previous Jamii Bora suitor, Commercial Bank of Africa, dropped its acquisition bid and instead merged with NIC Bank to form NCBA group #ticker:NIC.

The deal would increase number of buyouts in the Kenyan banking sector. Other lenders that have been acquired in the recent past include National Bank of Kenya #ticker:NBK bought out by KCB Group #ticker:KCB, Habib Bank Kenya (by Diamond Trust #ticker:DTB), Fidelity Commercial Bank (SBM), Giro Commercial Bank (I&M), Equatorial Commercial Bank (Mwalimu Sacco), K-Rep (Centum #ticker:ICDC) and Fina (Guaranty Trust).

Co-op bank says it will carry out due diligence on the tier III lender, which will also inform its price offer.

CBA had in January last year made a Sh1.4 billion cash offer to buyout Jamii Bora Bank.

The Central Bank of Kenya (CBK) says proposed acquisition by Co-op bank would enhance stability of the banking sector.

“CBK welcomes the transaction which will diversify the business models of the two institutions and enhance the stability of the Kenyan banking sector,” said CBK in a statement on Wednesday.

The transaction will require regulatory approval from the CBK, Capital Markets Authority and the Competition Authority of Kenya.

The Nairobi Securities Exchange-listed Co-op commenced operations in 1965 and had the fourth highest market share (9.63 percent) in the banking industry at the end of last year.

In contrast, Jamii Bora, started in 2010 after the acquisition by City Finance Bank, and had a market share of 0.12 percent, putting it at position 38 out of 39 banks.

The deal will lead to changes in market share as well as expansion of Cooperative bank branches. The tier I lender has 159 branches while Jamii Bora has 17.

Jamii Bora’s last published financials are for the first quarter of 2018 when it had assets worth Sh12.5 billion.

Its liquidity ratio was in negative 11.1 percent compared with CBK’s minimum of 20 percent as at end of March 2018, leaving it in liquidity deficiency of 31.1 percent.