Premier Bank Limited from Somalia has received approval from the Competition Authority of Kenya (CAK) to acquire a 62.5 percent stake in the struggling First Community Bank in a deal whose value is yet to be made public according to local dailies.
The Somalia-based lender has been in business for under 10 years, mainly in Somalia. Its entry makes the first bank from Somalia to set foot in Kenya.
If approved by the Central Bank of Kenya (CBK), the acquisition will help support First Community Bank, whose core capital had dropped to 924 million shillings against the required minimum of 1 billion shillings, risking being shut down by the regulator.
The reduced capital left First Community Bank’s core capital to total risk-weighted assets ratio at 7.1 percent compared to the required minimum of 10.5 percent. The total capital-to-risk-weighted assets ratio was 11 percent against the allowed minimum of 14.5 percent.
“Pursuant to the provisions of section 46 (6) (a) (ii) of the Competition Act, 2010, it is notified for general information that in the exercise of the powers conferred upon the CAK by section 46 (1) of the Competition Act, the CAK has authorized the implementation of the proposed merger as set out herein,” said Adano Wario, acting Director-General at the Competition Authority of Kenya.
Premier Bank is a privately-owned Sharia-compliant commercial bank incorporated in Somalia in 2013 and licensed by the Central Bank of Somalia in 2014, making it a match for FCB. If acquired, First Community Bank will give it a try to regain its base.
FCB received a CBK licence in 2007 and commenced official operations on June 1, 2008, as the first fully-fledged Shariah-compliant bank in Kenya. Last year, there were rumors of First Community Bank collapsing, causing massive panic among its customers.
The lender was in October last year faced with a bank run triggered by what it said was a system hitch that hit its operations.