Premier Bank, Somalia’s largest commercial bank, has acquired a 62.5% stake in First Community Bank, Kenya’s Islamic banking lender, for $21.6 million. The deal, which was approved by the Competitions Authority of Kenya last Friday, is expected to strengthen the struggling bank’s capital base and improve its financial performance.
“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,” read a statement by Adano Wario, acting director-general at the CAK.
First Community Bank has been struggling to meet the Central Bank of Kenya’s capital ratios since 2018. Its capital to total risk-weighted assets ratio—which measures the minimum amount of capital available to protect depositors— was at 11% against the allowed minimum of 14.5%. The core capital to total risk-weighted assets ratio stood at 7.1% compared to the required minimum of 10.5%. This has led to a decline in its profitability and market share.
As such, the acquisition is a welcome reprieve that will allow the troubled bank to benefit from Premier Bank’s financial strength and expertise. The acquisition is expected to boost the bank’s capital position and enable it to expand its operations in Kenya and the region.
Premier Bank, which is headquartered in Mogadishu, is one of the leading banks in Somalia. The bank has a strong track record of providing innovative financial solutions to its customers. With this acquisition, the lender will strengthen its position as one of the leading Islamic banking institutions in the region. Moreover, the deal is expected to increase competition in Kenya’s banking sector, which has been dominated by a few large players.
This deal is a significant milestone for both banks and is expected to create new opportunities for growth and development in the region’s banking industry.
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