Moody’s backs Nedbank’s NCBA deal as credit positive

Moody’s says Nedbank’s proposed purchase of a controlling stake in Kenyan lender NCBA for R13.9bn is credit positive for South Africa’s banking major because it will help diversify its earnings base and strengthen its presence in higher-growth African markets. Nedbank took the market by surprise last month when it said it had clinched a deal to buy a 66% stake inNCBA, a company domestic rival Standard Bank was also pursuing. Moody’s said the mooted deal would not change Nedbank’s risk profile.

“The acquisition would enhance Nedbank Group’s geographic diversification and longer-term growth prospects by increasing its exposure to East Africa, a region with structurally higher economic and credit growth than Nedbank’s core South African market,” Moody’s said in a statement. Read:Big six maintain grip on South Africa’s banking assets “Kenya is a key regional financial hub, and NCBA would provide Nedbank with an established banking franchise with strong positions in retail, small and medium-sized enterprises (SMEs) and corporate and digital banking, alongside operations across Kenya, Uganda, Tanzania and Rwanda. “Entry through an established entity reduces execution risk compared to organic expansion, and it would accelerate Nedbank’s ability to extend its corporate and investment banking activities in the region.” NCBA’s main shareholders include the Kenyatta family and that of the erstwhile governor of the Central Bank of Kenya, Philip Ndegwa.

It has a client base of 60-million. Entry through an established entity reduces execution risk compared to organic expansion, and it would accelerate Nedbank’s ability to extend its corporate and investment banking activities in the region. NCBA also operates in other East African economies — Tanzania, Uganda and Rwanda — and has a “digital offering in Ghana and Ivory Coast” in West Africa.

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Media reports from Kenya suggest that the Standard Bank-NCBA deal collapsed over branding disagreements. Nedbank’s South Africa franchise accounted for 90% of the group’s R1.4-trillion in assets and contributed 79% of the group’s R16.9bn headline earnings in the 2024 financial year.

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