(Ecofin Agency) - On December 7, 2018, the share of Kenyan bank NIC Bank rose by 32.45% on Nairobi stock exchange, to reach Ksh30 ($0.2930) a day after the announcement of discussions about a merger with Commercial Bank of Africa (CBA).

NIC Bank and Commercial Bank of Africa announced, in a joint statement published on December 6, 2018, that they would initiate discussions on an eventual merger.  

NIC Bank is a middle-sized bank while CBA is among the largest banks in the leading economy in East Africa.  

"The boards believe that combining the business of two highly profitable entities would create enhanced capacity through capital consolidation and strong liquidity to capture strategic growth opportunities", the two banks said in the joint statement.  

An eventual merger of the two institutions would be the first major transaction in the Kenyan banking industry since the rate cap introduced by authorities in 2016.

Commenting on the eventual merger, Kenya’s minister of finance Henry Rotich explained that "the talks between NIC Bank and CBA are welcome"  noting that an agreement in that regard would strengthen the financial sector.

"Consolidation of the financial sector is something of importance. So as you see more banks consolidating on voluntary basis, that is a welcome move, so that we can ensure the banks are strong enough to provide sufficient credit to SMEs", he said adding that "mergers between banks will also let them extend their reach in the region”.