According to recent reports, Muslim Commercial Bank (MCB), one of Pakistan’s largest banks is all-set to acquire Kenya’s Middle East Bank (MEB), for an undisclosed sum.
MCB will reportedly own the leading stock in MEB valued at around $7.4 billion. The acquisition will also see MEB’s transfer of assets including retail and corporate sector businesses in: Sri Lanka, UAE, Bahrain, Azerbaijan and Hong Kong.
The Managing Director of MEB confirmed to media that negotiations for the proposed acquisition are very much underway; though he was unable to provide more details stating he’s bound by a confidentiality agreement.
The core Capital of MEB consists of four branches in Nairobi and Mombasa. The bank’s total worth of assets recorded for a nine month period between January and September 2013 was estimated at $0.07 billion, against total liabilities of $0.05 billion.
Apart from MCB’s proposed acquisition of MEB, Kenya’s banking sector will also see some other major changes. The Central Bank of Kenya’s new capital policies will reportedly have a negative impact on small banks. Not only will banks be required to maintain a minimum core capital of $0.01 billion (as per the December 31st, 2012 Banking Act), but they also have to observe new capital ratios under the stated guide lines.
Additionally, the new requirements state that the computation of risk-weighing assets (currently based on credit risk) will consolidate a charge for market risk and operational risk. Initially, the Central Bank of Kenya (CBK) had extended all banks a timeline of 18 months to comply, but the deadline has since been revised to 24 months.
CBK’s new policies have resulted in the merger and acquisition of many small banks while others are opting to knock-on the doors of foreign money lenders. Various banks are devising multiple strategies and opting for different solutions to ensure their survival from growing market competition and the destabilizing factors of the new capital requirements.