I&M Bank building along Kenyatta Avenue, Nairobi. An expected merger
between I&M Bank and City Trust is set to face fresh scrutiny from
the CBK. FILE
Nation Media Group
By George Ngigi
In Summary
- Lender’s listing may be delayed as merger faces tighter scrutiny from the Central Bank of Kenya.
- New guidelines released by CBK last month gave the regulator powers to vet holding companies acquiring more than 25 per cent of a bank’s paid up share capital.
The anticipated merger between I&M Bank and City Trust is set to face fresh scrutiny from the Central Bank that will slightly delay listing of the lender at the stock market.
On Tuesday City Trust Limited said it had made a
fresh application to the Central Bank of Kenya (CBK) for approval of the
merger deal following change in laws relating to shareholding limits.
The change has forced City Trust to delay its
listing of the bank’s shares on the Nairobi Securities Exchange by a day
to June 12, while extending the period for I&M shareholders to
accept the offer by two weeks to May 3.
New guidelines released by the Central Bank last
month gave the regulator powers to vet holding companies acquiring more
than 25 per cent of a bank’s paid up share capital.
“City Trust (CTL) is exploring an alternative
option for CBK to approve it as a non-operating holding company in
accordance with changes to the banking Act introduced earlier this
year,” said I&M in a statement.
The amended Banking Act now permits CBK to approve
a non-operational holding company to hold more than 25 per cent of the
shareholding in a banking institution.
This is in line with industry regulations which
limit any individual shareholder from owning more than a quarter of a
bank unless it is a financial institution or with a special exemption by
the regulator.
In granting the approval the regulator will
consider whether the transaction would result in a monopoly,
substantially reduce competition and an assurances that the holding
company will make available information on its operations as required by
CBK.
The guidelines also give CBK powers to impose
conditions on any approval, including conditions to address competitive,
financial, managerial, compliance or other concerns, to ensure that
approval is consistent with the relevant statutory factors and
provisions of the Banking Act.
“Accordingly, approval from CBK and/ or
publication of the exemption is still awaited in order to proceed with
the transaction,” said City Trust said in a statement
City Trust Limited (CTL) had asked for exemption
from the provisions of section 13 sub section one of the Banking Act
which states that no person other than another institution, the
government, or state corporation shall hold directly or indirectly more
than 25 per cent of the share capital of any bank.
“CTL announces that it has received acceptances
from I & M shareholders of not less than 90 per cent in value of the
I & M Bank shares which are the subject of the offer and that
accordingly the offer is now unconditional,” said City Trust.
The new non-operating holding company rules are
the last hurdle to the deal which will see City Trust, listed in the
alternative segment of the NSE, swap shares with the shareholders of its
subsidiary I & M bank in what has been described as a reverse
takeover deal.
I & M shareholders will hold 92.7 per cent of the new
holding company, which will be called I & M Holdings Limited. The
transaction will culminate in the listing of the bank shares in the main
investment segment as the transaction will help push the City Trust
capitalisation above the Sh50 million capital threshold.
I & M is a mid-tier bank with an asset base of
Sh91.5 billion and which posted an after tax profit of Sh3.3 billion
last year. It has subsidiaries in Tanzania, Mauritius and Rwanda.
Already international investors such as the world
bank’s private sector lending arm, International Finance Corporation
(IFC) have shown interest in owning a piece of the bank which currently
has over 800 shareholders (see article).
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