Mauritian Private Equity Fund Shorecap III, LP has acquired a 20 per cent shareholding in Credit Bank PLC (CBP). The acquisition will take effect on June 15, 2023.
In August 2019, Oikocredit acquired a 22.8 per cent stake in the lender after paying a cash consideration of Kshs 1.0 billion with the transaction trading at price to book (P/B) multiple of 1.5x.
The Central Bank of Kenya said it approved the transaction on April 24, 2023, under Section 13(4) of the Banking Act, and subsequently by the Cabinet Secretary for the National Treasury and Planning on April 28, 2023, in accordance with Section 9(1) of the Banking Act.
Shorecap III, LP, is a private equity firm investing in the financial services sector across Africa, specifically targeting investments in the banking, insurance, and other financial services sectors.
Shorecap operates as a Limited Partnership Agreement and its shares are owned by ShoreCap III GP Limited, African Development Bank Group, CDC Holdings Guernsey Limited, European Investment Bank, KfW Development Bank, and Oesterreichische Entwicklungsbank AG (OeEB).
On the other hand, Credit Bank Plc is a public company incorporated in Kenya as a commercial bank. Through its 17 branches, Credit Bank offers services in personal banking, insurance intermediary services, trade finance, insurance premium financing, SME and corporate banking, loan products, mobile banking, and Internet banking.
According to the CBK data, as of March 31, 2023, CBP holds a market share of 0.5 per cent, classifying it as a small bank.
CBK classifies banks into three peer groups (tiers) using a weighted composite index that takes into consideration net assets, customer deposits, capital and reserves, and deposit and loan accounts.
Credit Bank’s Performance and Key Financial Ratios;
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Cytonn report: Summary of Credit Bank Plc Financials |
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| FY’2018 | FY’2019 | FY’2020 | FY’2021 | FY’2022 | |
| Balance Sheet Summary (Kshs bn) | |||||
| Net Loans | 13.0 | 15.2 | 15.6 | 15.5 | 17.5 |
| Total Assets | 17.9 | 21.7 | 23.2 | 26 | 25.8 |
| Customer Deposits | 13.1 | 16.8 | 17.6 | 20.4 | 17.5 |
| Total Liabilities | 15.0 | 18.6 | 20.0 | 22.6 | 22.5 |
| Shareholder’s Funds | 2.9 | 3.0 | 3.2 | 3.4 | 3.3 |
| Income Statement Summary (Kshs mn) | |||||
| Total Operating income | 1,719.4 | 1,794.9 | 1,754.1 | 1,638.3 | 1,575.3 |
| Total Operating expenses | 1,376.5 | 1,492.0 | 1,736.0 | 1,423.9 | 1,629.3 |
| Profit After Tax (PAT) | 248.5 | 393.8 | 92.1 | 138.1 | (1.7) |
| Balance Sheet Ratios | |||||
| Loan to Deposit | 99.3% | 90.6% | 88.6% | 75.9% | 99.5% |
| ROaE | 8.6% | 13.4% | 2.9% | 4.2% | (0.1%) |
| ROaA | 1.4% | 2.0% | 0.4% | 0.6% | (0.01%) |
| Income Statement Ratios: | |||||
| Yield on Interest Earning Assets | 1.8% | 2.3% | 0.5% | 0.6% | (0.01%) |
| Net Interest Margin | 6.6% | 5.4% | 5.6% | 4.3% | 3.6% |
| Cost to Income Ratio | 73.0% | 75.5% | 82.6% | 84.0% | 92.9% |
| Capital Adequacy Ratios: | |||||
| Core Capital liabilities ratio | 20.0% | 16.9% | 16.3% | 8.2% | 9.4% |
| Minimum Statutory requirement | 8.0% | 8.0% | 8.0% | 8.0% | 8.0% |
| Excess/Deficit | 12.0% | 8.9% | 8.3% | 0.2% | 1.4% |
| Core Capital risk-weighted assets ratio | 14.0% | 14.1% | 13.0% | 7.9% | 7.4% |
| Minimum Statutory requirement | 10.5% | 10.5% | 10.5% | 10.5% | 10.5% |
| Excess/Deficit | 3.5% | 3.6% | 2.5% | (2.6%) | (3.1%) |
| Total Capital risk-weighted ratio | 14.5% | 15.0% | 14.5% | 15.8% | 14.9% |
| Minimum Statutory requirement | 14.5% | 14.5% | 14.5% | 14.5% | 14.5% |
| Excess/Deficit | 0.0% | 0.5% | 0.0% | 1.3% | 0.4% |
| Liquidity ratios: | |||||
| Liquidity ratio | 21.0% | 26.0% | 26.5% | 39.4% | 20.5% |
| Minimum Statutory requirement | 20.0% | 20.0% | 20.0% | 20.0% | 20.0% |
| Excess/Deficit | 1.0% | 6.0% | 6.5% | 19.4% | 0.5% |
| Asset quality ratios: | |||||
| Gross Non-Performing Loan Ratio | 8.3% | 10.1% | 11.9% | 27.2% | 27.4% |
| NPL Coverage Ratio | 36.8% | 35.8% | 65.4% | 59.7% | 63.1% |
“In light of the recent Credit Bank’s performance, we expect the completed acquisition to boost the Bank’s capital adequacy and liquidity ratios to above the minimum statutory requirements and positively impact the bank’s operations,” noted Cytonn Investments on the acquisition announcement.
The acquisition is also a welcome move as it ensures that the bank’s customer deposits are protected and will bring stability to the bank.
Additionally, the completed transaction will enhance diversification and strengthen the resilience of the Kenyan banking sector. Going forward, we expect to see more acquisition and consolidation activities in Kenya’s banking sector as larger banks and other companies with sufficient capital base take over smaller and weaker banks.”
