NAIROBI: Kenya’s KCB Group has agreed to sell subsidiary National Bank of Kenya (NBK) to Nigeria’s Access Group, KCB’s chief executive said on Wednesday.

Paul Russo told an investor briefing the deal was struck at 1.25 times book value, but did not give the exact figure.

“The right thing to do is to accept a binding offer from Access Group,” he said.

KCB Group shares were up 9.9% following news of the deal.

The company, the second-biggest lender in Kenya, bought NBK, a medium-sized lender that was then controlled by the state, in a rescue deal engineered by the central bank in 2019.

“Regrettably, some significant legacy pains have eroded all the gains we have made,” KCB Group chairman Joseph Kinyua told the investor briefing, referring to efforts to turn NBK around.

KCB had initially indicated it was invested in NBK for the long haul. However, narrowing capital adequacy ratios in the last two years may have prompted a rethink, said Eric Musau, head of research at Nairobi-based Standard Investment Bank.

NBK’s core capital to risk-weighted asset ratio was 6.9% at the end of September, below the minimum requirement of 10.5%.

“They would have needed to recapitalise NBK,” Musau said, adding KCB would be able to pay shareholders a return if the sale is confirmed.

NBK was the only subsidiary in the group, which posted a drop in revenue last year from 2022, Russo said.

The sale of NBK to Access will allow the investments KCB has put in the business over the last four years to be preserved, Russo added.