CBK approves Nedbank’s 66% stake in NCBA as questions turn to the premium valuation

The Central Bank of Kenya has approved Nedbank Group Limited’s acquisition of up to 66 percent of NCBA Group, moving the KSh116.3 billion (US$855.82 million) transaction closer to completion.

CBK says the approval was granted on August 28, 2026, under Section 13(4) of the Banking Act. The acquisition will take effect once the transaction is completed in accordance with the agreement between the two parties.

The approval marks an important point in a deal that will place one of Kenya’s largest banking groups under the control of a South African financial institution. But the more interesting question is what Nedbank believes it is buying, and whether that justifies the premium it has agreed to pay.

At about 1.4 times book value, the NCBA transaction is priced above several recent banking deals in the region. Access Bank’s acquisition of National Bank of Kenya was valued at about 1.25 times book, Equity Group’s acquisition of Rwanda’s Cogebanque at about 1.26 times, while a consortium acquiring a 39 percent stake in Sidian was priced at about 0.95 times book.

Nedbank CEO Jason Quinn does not dispute that the price carries a premium. His argument is that NCBA has characteristics that conventional price-to-book comparisons do not fully capture.

CBK approval moves the transaction closer to completion

CBK’s announcement is careful about the status of the transaction. The regulator has approved the acquisition of up to 66 percent of NCBA’s issued share capital, but the acquisition itself has not yet been completed.

That distinction matters. The transaction still has to be consummated in accordance with the terms agreed between Nedbank and NCBA.

Once completed, however, Nedbank will gain control of a financial-services group that has built a substantial presence in Kenya and across parts of East Africa. NCBA was formed in 2019 through the merger of NIC Group and Commercial Bank of Africa and has since developed into a diversified group spanning banking, digital lending, insurance, investment banking, stockbroking and leasing.

For Nedbank, that gives it something more valuable than a new subsidiary in Kenya. It gives the South African bank a ready-made East African platform.

Why Nedbank was prepared to pay 1.4 times book

The valuation was one of the more contentious aspects of the transaction when Nedbank announced the proposed acquisition.

At first glance, paying 1.4 times book value for NCBA looks expensive against comparable transactions. Quinn, however, argues that the multiple has to be viewed in the context of what Nedbank is trying to achieve.

When he took over as Nedbank CEO about 18 months before the transaction, he said the bank undertook a strategic review. One conclusion was that Nedbank should direct capital toward businesses where it could exercise meaningful control.

That thinking helps explain the contrast with Ecobank Transnational.

Nedbank had held about 22 percent of Ecobank, a sizeable financial investment but one that did not give it control over the bank’s strategy. Quinn said that although Nedbank remained supportive of Ecobank’s leadership, the minority position limited its influence. He also pointed to the difficulty of extracting returns from the West African business, particularly through dividends.

Nedbank subsequently exited its Ecobank position for about US$100 million.

NCBA offered a very different proposition: a controlling stake in a well-established bank operating in a region Nedbank considered strategically attractive.

As Quinn put it, “it was also necessary for us to acquire control. And there’s always a premium for that.”

That is only the first part of the valuation argument.

NCBA’s digital business is central to the deal

Quinn’s more revealing argument concerns NCBA’s technology.

Nedbank sees NCBA’s digital capabilities as assets that could potentially be scaled beyond Kenya and incorporated into its wider operations.

“NCBA has amazing technologies,” Quinn said, pointing specifically to the bank’s digital and fintech capabilities.

That matters because NCBA has built a considerable digital business alongside its conventional banking operations.

In 2025, the group reported KSh23.4 billion in profit after tax and KSh73.3 billion in operating income. Digital loan disbursements reached about KSh1.4 trillion during the year, while the digital business contributed about KSh9 billion in profit before tax, accounting for roughly a third of group profitability.

The bank has also moved beyond digital credit. Its ConnectPlus platform, launched for corporate and SME customers, covers payments, liquidity management, collections and trade finance, using cloud-native technology, microservices and open banking APIs.

That gives greater context to Quinn’s valuation argument.

Price-to-book works reasonably well when assessing a bank primarily through its financial assets and liabilities. It becomes less complete when the target also owns technology, distribution infrastructure, customer relationships and digital capabilities that can potentially be replicated across other markets.

Quinn made precisely that point, arguing that when a bank possesses scalable technology, price-to-book is not always the best determinant of value.

That does not automatically make 1.4 times book cheap. It does, however, explain why Nedbank is comfortable paying more than the headline comparable multiples suggest.

The dividend story also matters

NCBA’s ability to generate cash for shareholders was another part of Nedbank’s valuation case.

Quinn described the bank as a strong dividend payer, noting that its earnings correlate well with cash flows. That matters to an investor paying a premium for control because the acquisition is not based solely on future growth.

NCBA already generates significant earnings and distributes a meaningful portion of them to shareholders.

The group paid KSh11.7 billion in dividends for 2025, up from KSh9.1 billion the previous year. Its dividend history therefore gives Nedbank another source of confidence that the business can generate returns while funding its growth.

There is also the balance sheet. Quinn described NCBA as exceptionally well capitalised and said the bank would remain strong even when considered through different Basel capital methodologies.

In other words, Nedbank is buying a business that combines current earnings and dividends with the possibility of future technology and regional growth.

Nedbank brings capabilities of its own

The potential value creation is not expected to run in only one direction.

Nedbank intends to support the strategy NCBA has already been pursuing while bringing capabilities where it has greater depth.

Quinn specifically mentioned corporate banking and investment banking, along with opportunities around the energy and resource sectors.

That could give NCBA access to a deeper pool of expertise for large corporate transactions, infrastructure, energy and cross-border trade.

There is also the possibility of combining NCBA’s digital capabilities with Nedbank’s financial and capital-markets expertise.

The result could be a two-way exchange.

NCBA gives Nedbank a digital banking platform, an established Kenyan brand, regional distribution and experience in markets where mobile-first financial services are deeply embedded.

Nedbank brings capital, corporate banking capabilities, investment banking expertise and a stronger position in areas such as trade finance and capital markets.

That combination is central to the investment thesis.

NCBA will remain NCBA

Despite the change in ownership, customers should not expect the NCBA name to disappear when the transaction closes.

Quinn was asked directly whether Nedbank planned to convert NCBA into the Nedbank brand. His response was unequivocal: Nedbank believes it has acquired a strong brand with substantial resonance in the Kenyan market and expects to retain it.

The longer-term vision is for NCBA to continue trading under its own name while being visibly connected to the wider Nedbank Group.

There is a practical reason for that decision.

Nedbank does not have a significant existing Kenyan banking operation that needs to be merged with NCBA. There are therefore no obvious duplicate branch networks or parallel retail businesses that would need to be consolidated.

Nedbank can instead use NCBA as its route into the Kenyan market.

Quinn put it plainly: “NCBA is the way we go to market.”

That makes the existing brand, customer relationships and local operating expertise part of the value Nedbank is paying for.

Kenya is the platform, not necessarily the destination

The geographical strategy behind the transaction may ultimately prove more important than the Kenyan acquisition itself.

Quinn sees Nedbank’s existing operations in South Africa, Mozambique and Namibia as forming a Southern African hub, while NCBA can provide an Eastern African hub centred on Kenya.

From there, Nedbank sees opportunities to extend deeper into East and potentially Central Africa.

The bank also sees a role in facilitating trade between Africa and Asia, particularly as commercial relationships with China and India develop.

That creates a broader strategic proposition for Nedbank.

South Africa provides capital and scale. Kenya provides access to East Africa. NCBA’s existing regional footprint provides additional reach. The combined group can then pursue corporate banking, trade finance, foreign exchange, commodities, fixed income and capital-markets opportunities across these markets.

For Nedbank, that is a much more compelling proposition than simply acquiring another African bank.

The 80:20 structure gives NCBA shareholders a stake in the buyer

The transaction’s consideration structure is another important part of the deal.

The arrangement gives NCBA shareholders a combination of cash and Nedbank shares, with an 80:20 equity-to-cash split.

Quinn said Nedbank spent considerable time designing the structure because shareholders have different priorities. Some want a liquidity event, while others may prefer to retain exposure to the future growth of the business through Nedbank.

If all NCBA shareholders offered the 80 percent equity option take it up, Quinn said they would collectively own just under 9 percent of Nedbank.

That creates an unusual relationship between the two shareholder groups.

A portion of NCBA’s existing shareholders will effectively move from owning part of a Kenyan banking group to owning part of the South African institution that will control it.

The Johannesburg Stock Exchange component also gives those investors exposure to a deeper and more liquid capital market.

Quinn stressed that Nedbank already has a broad shareholder base, with large institutional investors alongside retail shareholders, and said the bank is comfortable engaging with both.

The NCBA strategy does not disappear

NCBA enters the transaction with its own growth strategy rather than as a struggling bank waiting for a rescue.

The group’s 2026–2030 Ubuntu strategy focuses on strengthening its core business, expanding high-growth segments and pursuing new geographic and sector opportunities.

Its recent financial performance suggests there is momentum behind that strategy.

The question for Nedbank will therefore be whether it can accelerate what NCBA is already doing without disrupting the qualities that made the bank attractive in the first place.

That could prove more important than any immediate reorganisation.

Nedbank has no reason to dismantle a functioning Kenyan franchise. It has acquired control precisely because the franchise is working.

What happens to dividends after the deal?

One of the questions NCBA shareholders will continue to watch is whether the bank’s dividend policy changes once Nedbank becomes the controlling shareholder.

Quinn was cautious when asked about this.

He said dividend decisions would fall within the remit of the NCBA board and pointed to the established payout policy, which Nedbank is comfortable with.

That is significant because it avoids making a promise that has not yet been made.

The acquisition creates a new ownership structure, but there is no basis yet to assume that NCBA’s dividend policy will be radically recalibrated.

The same caution applies to the flow of capital between Kenya and South Africa. Nedbank will ultimately have a controlling interest, but the commercial logic of the acquisition also depends on NCBA continuing to grow and invest.

Basel III is unlikely to derail the strategy

Kenya and South Africa have taken different approaches to implementing Basel III, and that naturally raises questions about how NCBA will fit into a South African banking group.

Quinn does not appear particularly concerned.

He described South African regulators as early adopters of international banking standards, while emphasising that this is a matter of local regulatory preference rather than a question of one framework being right and another wrong.

More importantly, he said CBK’s record in protecting the safety and soundness of Kenya’s banking system gave Nedbank confidence in the transaction.

He also argued that NCBA carries enough capital that the difference between the Kenyan and South African approaches does not materially undermine the strength of the bank.

The regulatory frameworks will still matter operationally after completion, particularly as Nedbank consolidates the subsidiary within its broader group. But from management’s perspective, they were not a reason to walk away from the acquisition.

The real test starts after completion

CBK’s approval removes one of the most important regulatory obstacles facing the transaction. What comes next will determine whether Nedbank’s premium valuation makes sense.

The 1.4 times book value multiple will eventually be judged against actual performance.

Can NCBA’s digital lending and transaction-banking capabilities be deployed elsewhere within Nedbank? Can Nedbank deepen NCBA’s corporate and investment banking business? Can Kenya become the East African hub Quinn envisages? Can the combined group capture more trade between Eastern and Southern Africa and markets in Asia?

There is also the shareholder question. Will the JSE equity component create meaningful diversification for NCBA investors, and will the new ownership structure preserve the dividend characteristics that made NCBA attractive in the first place?

Those questions cannot be answered by a regulatory approval.

What CBK has done is clear the way for the transaction to proceed. What Nedbank must now demonstrate is that the strategic assets it identified in NCBA are worth more together than they were separately.

The KSh116.3 billion price will ultimately stand or fall on that proposition.

Nedbank is buying control of a profitable Kenyan banking group with a strong brand, regional operations, a substantial digital business and technology it believes can travel beyond Kenya. It is also bringing its own capital, corporate banking capabilities and South African market access into the equation.

If those pieces work together, the premium Nedbank agreed to pay could prove justified.

If they do not, the 1.4 times book valuation will remain the hardest part of the deal to defend.