I$M stock gains the most on Giro Bank takeover

I&M Bank share price rose 12 per cent to hit Sh120 in intraday trading Monday on news of Giro bank acquisition.

I&M Holdings Ltd has signed an agreement to acquire all stake at Giro Commercial Bank Ltd subject to regulatory approval.

The agreement puts I&M, the country’s seventh biggest lender by market capitalisation, on course to own Giro Commercial Bank’s total assets that stand at Sh19 billion.

I&M automatically takes over Giro Commercial Bank’s seven branches that contributes to a 0.5 per cent market share.

“The proposed acquisition, upon completion, envisages the immediate merger of Giro’s banking business into I&M Bank Limited (“I&M Bank”), IMHL’s flagship subsidiary,” said a statement by I&M bank on Monday.

The acquisition is subject to a number of approvals under the Banking Act, from the Capital Markets Authority, the Competition Authority of Kenya and I&M shareholders in general meeting.

DROP IN COMMERCIAL BANKS

The National Treasury had predicted that there would be mergers and acquisitions this year leading to a drop in commercial banks from 44 to 30 triggered by higher capital requirements.

The Treasury secretary Henry Rotich proposed in the Finance Bill 2015 that the minimum core capital requirements for banks be raised five-fold to Sh5 billion by 2018. Standard Investment Bank (SIB) in a research note said that Giro’s core capital was Sh2.3 billion.

“We are reviewing the structures to ensure that the industry has a few banks that can compete fairly leading to lower interest rates,” said Mr Rotich.

According to SIB, the acquisition will benefit I&M Holdings in expanding its branches since they have plans to increase its networks.

The two banks both focus on lending to small- and medium-sized enterprises and on retail banking, it will therefore be easier to integrate the models.