Oriental Bank owners cede control to investor

Corporate News

Customers at an Oriental Commercial Bank branch. In the nine months ended September, the bank posted a 14 per cent decline in net profit to Sh87.9 million. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

Shareholders of Oriental Commercial Bank are set to surrender majority ownership to a strategic investor for an undisclosed amount.

The transaction, revealed in a notice published on Friday, gives the new investors access to one of the most profitable sectors of the economy going by 2014 performance figures announced by the lenders.

“It is notified for general information that the Competition Authority of Kenya has approved the proposed acquisition of 51 per cent of the issued shares of Oriental Commercial Bank Limited by M. Holdings Limited,” reads the notice.

The Business Daily could not immediately establish the individuals behind “M. Holdings,” or whether they are Kenyan or foreign investors.

Oriental Bank had earlier announced that it was looking for a strategic investor to sharpen its competitive edge in a market dominated by big banks.

One of the listed agenda items at the bank’s AGM last year was “to consider and authorise the board of directors to negotiate and enter into strategic arrangements with potential investors.”

The search for new investors saw Oriental increase its share capital significantly, signalling that it was looking for a cash injection rather an exit opportunity for its major shareholders.

The bank increased its share capital from Sh2.5 billion to Sh3.5 billion through creation of 50 million new ordinary shares valued at Sh20 each.

The transaction marks the latest deal in the country’s banking sector where small and medium-sized banks have raised funds to fuel their expansion plans and meet new higher capital ratios.

Transactions

Equatorial Commercial Bank, for instance, is selling a 51 per cent stake to Mwalimu Sacco for Sh1 billion. Several other banks, including National Bank, NIC and DTB; have raised or are set to raise billions of shillings from rights issues and corporate bonds.

Other banking sector transactions have been prompted by profit-taking activities including Equity Bank’s sale of its 24.7 per cent stake in Housing Finance to Britam for Sh2.8 billion.

Private equity firm Helios is also set to sell its 12.23 per cent interest in Equity Bank to a consortium led by sovereign wealth fund Norfund for an undisclosed sum.

For Oriental, the strategic investor will pump in new capital and technical expertise to help grow its market share in the banking sector where it is a relatively small player.

The bank posted a 14.3 per cent decline in net profit to Sh87.9 million in the nine months ended September, weighed down by higher interest expenses and reduced income from transactions.