Co-op bank breathes life back into Jamii Bora

In just under eight months since acquiring Jamii Bora Bank (JBB), the lender now renamed Kingdom Bank has moved back into the profitable zone in the quarter ending March 2021.

For a lender barely disclosing its financial health in years prior to the acquisition in August 2020, the bounce back marks an incredible fete for both Kingdom & Co-operative banks.

In the quarter closing on March 31, Kingdom booked a Ksh.126.7 million net profit climbing from a Ksh.200.9 million net loss in the full year ending in December 2020- the first disclosed annual results since 2017.

In late August, Jamii Bora Bank became Kingdom Bank after both shareholder and regulatory approvals.

Co-op paid Ksh.1 billion, infused in the lender as new capital, and in exchange received 224.2 million new shares representing a 90 per cent stake in the bank.

Subsequently, Co-operative Bank appointed a new board for its latest acquisition as it sought to stabilize the operations of the lender in the near term.

Kingdom bank’s first quarter balance sheet reflects the results of the lender’s new stewardship.

For instance, Kingdom booked Ksh.920.4 million in total operating income with net interest income standing at Ksh.895.1 million.

This to beat its non-interest based expenses which stood at Ksh.793.6 million in the period, setting up the lender for a return into profitability.

The rise of Jamii Bora from the ashes mirrors the results of previous mergers and acquisitions which have effectively served to strengthen the local banking scene.

One year on after its acquisition by KCB Group, the National Bank of Kenya (NBK) rallied back into profitability, posting earnings of Ksh.177.7 million in 2020, reversing a Ksh.337 million loss in 2019.

The rise of the now KCB subsidiary was anchored on a rebound in balance sheet growth and revenue generation.

While the status of many banks at the time of mergers and acquisitions lie in peril, the purchasing entities have found value the investments, pumping in funds to drag the banks back into income generating ventures.

“Nobody goes to buy a fat cow unless you don’t know how to do business. If you buy a business where the market value has already been exploited, you would be putting shareholder funds to waste. If you are to ask the same question on whether I would still buy NBK, the answer is a yes,” KCB Group Managing Director Joshua Oigara told Citizen Digital in March last year.

The Central Bank of Kenya (CBK) is backing on such visions to bring stability into the banking industry by preventing the unraveling of troubled lenders.

Earlier this week, the reserve bank disclosed the acquisition of Uwezo Microfinance Bank by Djibouti’s Saalam Africa Bank (SAB) terming the transaction strength to the business model of the local outfit and a mark of resilience for small-scale lending.

Mergers and Acquisitions (M&As’) in the banking industry are expected to resume this year as lenders move to consolidate operations after COVID-19 disruptions this year.

The activity is expected to find boosting in low bank valuations with the costs of bank acquisitions falling to their lowest in seven years.

At the same-time, M&A activity is expected to be shaped by surprise parties. For instance, mobile lender Branch International (Branch) is waiting in the wings to acquire Century Microfinance bank, a transaction which now awaits the approval of the CBK.