The Kenya Commercial Bank (KCB) has made a U-turn on an earlier decision to integrating the National Bank of Kenya (NBK) into its operations.
This comes after realization that NBK lost at least Ksh9 billion in deposits during the takeover transaction.
It is reported that NBK deposits dropped from Ksh91.3 billion in June to Ksh82.5 billion in September, a time whe the two banks were finalising merger plans.
NBK will, after completion of the merger, run as a stand-alone entity owned by KCB in what the latter termed as the fear of loss of deposits and customers.
According to new NBK CEO Mr Paul Russo, the bank could easily lose business affiliated to it if its operations were moved to KCB.
Read: KCB Gets Nod To Acquire 100 Percent Stake At NBK
With the new development, KCB will now have to inform the Capital Markets Authority of the change.
“The two entities have different competencies and propositions. We will go bank to the regulator about the model. Closing the brand comes with downsides because it is not automatic all customers will remain,” said Mr Russo.
NBK has been struggling to stay afloat, with it core capital standing at Ksh993.7 million, way below the statutory capital requirements.
The merger will see KCB increase its asset base to Ksh828 billion, becoming the largest bank in the country.
Read: KCB Names Paul Russo as NBK Managing Director as Merger Concludes Despite Protests
KCB is also planning to inject a Ksh7.5 billion capital to revive the dwindling fortunes. Bad loans for the bank have risen from Ksh7.2 billion in 2014 to the current 31.4 billion.
NBK was initially fully owned by the government since its inception in 1968, but the government has shed its stake to the current 22.5 percent.
NBK’s management has been accused of mismanagement and collusion with defaulters to forfeit the loans, which has run down the bank.
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