National Treasury Cabinet Secretary Henry Rotich.
The plan by National Treasury to merge three State-owned banks remains in the works despite a move by two of them to look for fresh capital.
According to National Treasury Cabinet Secretary Henry Rotich, the 2015 plan that will see Development Bank of Kenya, National Bank of Kenya (NBK) and Consolidated Bank folding into one entity is still in progress.
This is despite the latter two moving to seek additional funds to prop up their operations.
“We are reviewing various proposals on how that will be done. It is not yet concluded,” Rotich told The Standard in a phone interview.
With the three banks currently in breach of at least one statutory ratio and National Treasury non-committal on when the merger will happen, they have been forced to look for additional capital to strengthen their positions in the market.
Early this month, NBK Chief Executive Wilfred Musau said the lender was at the tail end of plans to receive a Sh4.4 billion shareholder loan to boost its capital.
Last December, Consolidated Bank announced that it was looking for an investor to strengthen its capital to enable it underwrite bigger businesses. Yesterday, Mr Rotich said raising capital in the face of a looming merger does not in any way complicate the exercise.
“Until the merger concludes, the three institutions will have to continue running as separate banks and they have to do what it takes to operate as banks,” he said.
The implementation committee for the planned merger is chaired by Chief of Staff and Head of the Public Service Joseph Kinyua.
The merger aims at giving policy leadership that will lead to increased size, scale and efficiency to the one institution formed. Company filings of the 2016 financial statements show that NBK’s total capital to total risk-weighted assets ratio stood at 11.9 per cent as at December 2016.
At this level, it is 2.6 percentage points below the Central Bank of Kenya’s statutory minimum of 14.5 per cent. In 2015, it had missed the threshold by 0.5 percentage points.