All hands on deck: Rotich assures Parliament of proper checks on KCB-NBK deal


All hands on deck: Rotich assures Parliament of proper checks on KCB-NBK deal
Treasury Cabinet Secretary Henry Rotich during his appearance at the Parliamentary Investments and National Planning Committee probe on Thursday June 27, 2019 PHOTO | CITIZEN DIGITAL

In Summary

  • According to the finance ministry, the purview of oversight to the transaction rests primarily on regulators comprised of the CBK and the CMA to end with Treasury exerting a minimal role in the acquisition dealings.
  • It is from the day’s sitting of the investment committee that Kenyans would learn of parliament’s irk with Treasury on the acquisition of NBK, where the state holds a majority stake through the Treasury and the NSSF.

The National Treasury has defended its position on perceived laxity under the ongoing procedures in the acquisition of the National Bank of Kenya (NBK) by KCB Group.

According to the Finance Ministry, the purview of oversight to the transaction rests primarily on regulators comprised of the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA) to end with Treasury exerting a minimal role in the acquisition dealings.

Treasury Cabinet Secretary Henry Rotich placed faith on the financial markets regulators and only now sees a window to intervene based on the disclosure of perverse outcomes by the industry chief-whips.

“We rely a lot on the regulators given that NBK makes for a publicly listed firm in spite of the lender also falling under the State parastatal bracket. We do receive regular information on adversities faced by banks and would act based on any such information,” Rotich told the National Assembly Committee on Investments and National Planning on Thursday.

Bewildered

It is from the sitting that Kenyans would learn of Parliament’s concerns with Treasury on the acquisition of NBK, where the State holds a majority stake through the Treasury and the National Social Security Fund (NSSF)

Rotich found the committee, chaired by Kipkelion East Member of Parliament Joseph Limo, wanting in its understanding of the role of Treasury under a mergers/acquisitions spell.

Committee members, for instance, tasked Treasury with explaining its non-action on the transaction basing its argument on the ministry’s stake in NBK and on its role in the greater financial markets scope.

“I think most of the concerns lie on the interests of minority shareholders. The minority might have a say but may not necessarily have their way with the only defender being the market regulators to include the National Treasury,” said Mr. Limo.

While CS Rotich concurred with the concerns raised by the legislators, the minister was quick to demystify its role in the matter as Parliament seemingly appeared demystified on mergers and acquisition providers.

“As shareholders, we would use our power to instill the changes deemed fit through the respective Annual General Meetings. We need to separate affairs, there is a board to run affairs as it is in the articles of association. The best practice is to also have an independent regulator. I feel like your line of questioning wants us to regulate banks which shouldn’t be the case,” Rotich told committee members.

Hostile takeover

The concerns of Parliament stem from the proposed acquisition of NBK by the KCB Group which in mid-March made public its desire to take up a 100 percent stake in the struggling lender in a move to consolidate its position as the largest bank in the region with an expected asset base of Ksh.1 trillion.

The deal estimated at an initial Ksh.6.6 billion has already garnered the support of KCB shareholders and now awaits regulatory approval from the CMA, CBK and the Competition Authority of Kenya (CAK)

NBK shareholders have already began setting the stage for the acceptance of the offer having voted to liquidate the banks preferential shares into ordinary shares at its AGM on June 14 , even as the deal remains open to a counter offer from a competing acquirer or strategic investor.

With the share conversion, the National Treasury now presents the majority shareholder with a stake rounding off to 66.2 percent while the NSSF fund holds a lesser 27 percent.

The National Treasury has continued to vote for the offer seeing limited options for the NBK, with the lender already standing at risk of breaching the CBK’s banking provisions from weighty stock of bad debts to end in the lender’s poor capitalization.

“It’s the best option given what is happening to the bank. We have very limited options. Our other options would lie in the privatization of NBK or a continuation of government stimulus against the wave of competing needs,” added CS Rotich.

Parliament is expected to continue its probe of the proposal at the start of July commencing with an inquiry of NBK’s board having already privately met with the CMA in the past week.

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Story By Kepha Muiruri
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