By Adelaide Changole and Eric Ombok.
Nedbank Group is executing a plan to boost its footprint across the continent and challenge bigger rivals, with the South African lender offering a premium to buy a majority stake in Kenya’s NCBA Group Plc.
South Africa’s fourth-largest lender said it will acquire about 66% of NCBA for around R13.9 billion ($855 million) in a transaction involving cash and shares as part of its strategy to limit reliance on its home market and to diversify revenue streams.
Nedbank will likely pay a price-to-book multiple of 1.4 times for a 19% return on equity, Avior Capital Markets analyst Adrienne Damant said in response to questions from Bloomberg.
That value relative to assets is more than all except two of the nation’s banks, and exceeds the average price to book of 1.1 for Kenyan lenders, according to data compiled by Bloomberg.
“It may have overpaid,” she said.
Nedbank shares fell as much as 3.7%, the most since September, while NCBA climbed the most since 2021 in Nairobi.
The price “doesn’t leave much room for mistakes,” said Ilan Stermer, a research consultant at Anchor Stockbrokers in London.
With the deal, Nedbank gains access to Africa’s fastest-growing region with NCBA’s 60 million customers across Kenya, Uganda, Tanzania, Rwanda. It also regains exposure to West Africa through NCBA’s digital-banking services in Ghana and Ivory Coast.
NCBA is expected to remain independently governed and will retain its brand, local leadership team and listing on the Nairobi Securities Exchange.
The decision came as a surprise to some investors who had anticipated Nedbank would focus on its home market after divesting from pan-African lender Ecobank Transnational in 2025.
“I do not think Nedbank should have done this deal for a simple reason: they have much to do in South Africa,” Stermer said, adding that there’s little for Nedbank to gain from the deal in the short to medium term.
The deal allows Nedbank to acquire an additional R2.1 billion of earnings while issuing R11 billion of Nedbank stock, which implies a 40 basis-point accretion to Nedbank’s return on equity, said Charles Russell, an analyst at SBG Securities.
It also creates the largest South African banking subsidiary by profit on the continent, ahead of Absa Group’s Kenyan unit and Standard Bank Group’s Stanbic IBTC in Nigeria, he added.
“Although some investors will be battling distressed memories of the recently disposed Ecobank Transnational, NCBA appears to be a far superior asset with good geographical reach, aligned to Nedbank’s Africa strategy,” Russell said. “We view this deal as a positive and maintain our buy rating.”