NCBA Bank Acquires Ksh860 Million Unga Group Loan Portfolio from Absa Bank

NCBA Bank, a subsidiary of the NCBA Group, has strengthened its domestic operations by acquiring Unga Group’s Ksh860 million ($6.6 million) loan portfolio from Absa Bank Kenya. This move reinforces NCBA’s position as a leading financial institution in East Africa.

The loan, originally issued in 2017 to finance Unga Group’s wheat milling plant in Eldoret, was scheduled to mature in June 2024.

Under NCBA’s revised terms, the facility has been restructured at a higher interest rate, with the margin now set at the Central Bank Rate (CBR) plus 6.35 percent, up from the previous CBR plus 3 percent.

Mounting Financing Pressures for Unga Group

Unga Group, a publicly listed milling company, continues to face rising borrowing costs amidst a challenging economic climate.

By June 2024, the company’s total bank loans had risen sharply to Ksh2.3 billion ($17.8 million), doubling from Ksh1.1 billion ($8.5 million) the previous year due to elevated interest rates.

Beyond the restructured loan, Unga also holds a Ksh530.2 million ($4.1 million) financing package with NCBA, which includes overdrafts, invoice discounting, bank guarantees, stock loans, and letters of credit in both Kenyan shillings and US dollars.

Despite these financial pressures, Unga reduced its net loss for the fiscal year ending June 2024 to Ksh669.6 million ($5.2 million), down from Ksh959.4 million ($7.4 million) the year prior.

This improvement is attributed to lower financing costs and a stronger Kenyan shilling. The company also paid Ksh13.25 million ($102,000) in severance to former Managing Director Joseph Choge, whose contract was terminated.

NCBA Group’s Growth Ambitions

NCBA Group, established in 2019 through the merger of NIC Bank Group and Commercial Bank of Africa, continues to solidify its presence as a key financial player in East Africa.

Supported by influential Kenyan families such as the Kenyattas, Meralis, and Ndegwas, the group operates subsidiaries in Tanzania, Rwanda, Uganda, and Côte d’Ivoire.

In the first half of 2024, NCBA reported a profit of Ksh9.8 billion ($75.7 million), a 5 percent increase from Ksh9.4 billion ($72.7 million) during the same period in 2023.

Recent initiatives include a partnership with Xpress Money to enhance global remittance services and the opening of a new branch in Ukunda, targeting nearly 867,000 residents with digital banking and loans.

The acquisition of Unga Group’s loan portfolio underscores NCBA’s strategy to leverage targeted investments to strengthen its foothold in Kenya’s financial sector while pursuing regional growth opportunities.