MPs now want Kenya Commercial Bank’s (KCB) offer to buy out cash strapped National Bank of Kenya (NBK) suspended, saying that it is exploitative and unfair to Kenyans.
According to a report by the National Assembly’s Departmental Committee on Finance and National Planning, the deal undervalues NBK and does not bear the best interest of workers, taxpayers, NBK staff and minority shareholders.
NBK is majority owned by National Treasury at 22.5 percent and National Social Security Fund (NSSF) at 48.05 percent shares.
“Considering submissions by stakeholders, the committee recommends that the principal shareholders NSSF, should not accept the offer by KCB on the acquisition of 100 percent shares of NBK,” the committee chaired by Joseph Limo said.
The MPs instead want the government to recapitalise the bank and try and resuscitate it, instead of selling it to KCB.
“The National Bank should pursue the Rights Issue in order to raise enough capital,” states the report.
KCB has offered to buy NBK through a share swap of one KCB share for every 10 of NBK. In the process, KCB has announced that it will create new 147.3 million shares to NBK’s investors.
NBK is operating at 2.2 percent in terms of core capital to deposit ratio, against a minimum prudential limit of eight percent.
The merger will see KCB become the biggest bank in the region in terms of assets under management, amounting to over Ksh1 trillion in three years.
The committee however feels that the bank (NBK) could turn around to profit making, if the right measure are applied.
“The current scenario has curtailed the bank from lending and also taking more deposits. As far as liquidity ratios are concerned, NBK is performing well at 40.4 percent as compared to KCB which is at 35.6 percent,” adds the report.
The legislators also argue that NBK is a principal revenue collector for the Kenya Revenue Authority (KRA), hence should be left to operate solely.
The fate of the merger now lies in the decision of NBK shareholders, with KCB shareholders having already approved the acquisition bid.
National Assembly’s Public Investments Committee (PIC) has directed Auditor-General Edward Ouko to conduct a special audit on NBK’s books of accounts.