At the start of 2019, NIC group announced plans of a merger with the CBA group. The union is significant as it will create Kenya’s third largest bank in terms of assets size and customer deposits. Some analysts have praised the decision by the two banks as they expect improved performance after the merger.
According to researchers at Sterling capital, NIC-CBA merger will result in reduced operating costs, increase in the customer base, and improved diversity of products. Additionally, the lenders will exchange useful skills and expertise and therefore increase productivity. For example, NIC bank is focused on asset financing and mainly serves mid-sized companies while CBA group is keen on corporate banking as well as digital finance.
Most significantly, the merger between NIC group and CBA group will intensify competition among tier one banks. Kenya’s banking sector is highly competitive. The joint company will offer stiff competition to existing lenders due to the expanded customer base, improved financial position, and a larger variety of banking products and services.
Some of the challenges the two banks are likely to face during the merger process are; different leadership structures, differences in financial performance, difficulties in integrating the banking systems, and fears of staff layoffs.
Nonetheless, analysts at Sterling Capital are optimistic about the merger. Based on their research, they recommend investors to buy NIC group shares. Their target price for the merged business is KSh52.60 per share.
