Nedbank aims to spend almost R14bn for a controlling stake in Kenya-based NCBA, a lender Standard Bank is said to have been courting too.
Nedbank, which relies on South Africa for 80% of its earnings, is looking to spread its wings to the fast-growing East Africa region after a disastrous investment in West Africa that ended in a costly withdrawal.
The lender, SA’s fourth-largest, said on Wednesday it has offered R13.9bn — more than 80% of its 2024 profit and over 10% of its JSE market capitalisation — for 66% of NCBA.
NCBA’s main shareholders include the Kenyatta family and that of erstwhile governor of the Central Bank of Kenya Philip Ndegwa. It has a 60-million-strong client base.
NCBA also operates in important economies in East Africa — Tanzania, Uganda and Rwanda — and has a “digital offering in Ghana and Ivory Coast”.
John Gachora, NCBA’s MD, said the merged group will anchor Kenya, East Africa’s largest economy, as a gateway to the rest of the region.
“Their [Nedbank’s] strong balance sheet will help us scale in our current markets as well as explore the investment proposition that the Democratic Republic of Congo and Ethiopia have to offer,” he said.
Bloomberg reported in September that Standard Bank, which already derives more than 40% of its earnings outside South Africa, was also interested in buying NCBA.
Under Nedbank’s offer, NCBA will retain its listing on the Nairobi Securities Exchange, with 34% of its stake traded on the bourse.
Nedbank group CEO Jason Quinn said the offer represents a milestone for the group’s strategy to grow its Southern and East African footprint.
“The proposed deal brings together two organisations with highly complementary strengths,” he said.
“NCBA offers a strong brand presence, an extensive regional network, advanced digital capabilities and deep customer reach, which naturally aligns with Nedbank’s established corporate and investment banking expertise, cross‑border structuring capabilities, and strong balance sheet.”
Combining NCBA’s substantial local presence with Nedbank’s capital base and expertise offers a “compelling platform for sustainable growth in the region”, Quinn added.
“We look forward to building a partnership that supports NCBA’s and our clients’ growth trajectories. This will further support economic development across the region while delivering attractive returns for all shareholders,” he said.
According to Nedbank, NCBA manages about R84.4bn in assets and disburses more than R126.9bn in digital loans annually. It has reported an average return on equity of about 19% over the past six years.
Under pressure
Business Day reported in August that Nedbank is under pressure to deliver its East Africa pivot after getting burnt in West Africa, where its purchase of a 21% stake in Ecobank Transnational Incorporated did not work out as planned, underscoring the risks of minority-stake banking in volatile markets.
The $100m (R1.63bn) sale of its stake in Ecobank, which was acquired for $500m, came after a decade that delivered R400m in dividends against R6.9bn in unrealised losses and a $293m impairment.
A succesful bid for NCBA would mark Quinn’s second-biggest transaction after the bolt-on acquisition of iKhokha for R1.65bn. Ikhokha is one of Africa’s fastest-growing fintech companies.
Quinn, who took control of the group just more than a year ago after the retirement of Mike Brown in 2024, wasted little time in restructuring the group, shaking up the lender’s retail and business banking divisions.
The restructuring led to the creation of business and commercial banking, a juristic-focused cluster that will cover SMEs and commercial clients.
Nedbank’s South Africa franchise contributed 90% of the group’s R1.4-trillion in assets and 79% of the group’s R16.9bn headline earnings in the 2024 financial year.
Standard Bank, by comparison, derives more than 40% of its earnings from its African portfolio, which stretches to 20 countries (excluding South Africa) with the recent addition of Egypt.
Standard Bank has also enjoyed success in West Africa, where it controls several entities. In the latest half-year earnings report, Standard Bank’s West Africa region, which houses the likes of Nigeria and Ghana, reported a 49% surge in headline earnings to R3.5bn, with a return on equity of 39.1%.
Absa, which has a significant presence in Kenya, also aims to grow beyond South Africa, which accounts for 65% of group earnings.
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