NCBA Bank acquires Unga Group’s $6.6 million loan portfolio from Absa Bank

Timilehin Adejumobi -
Key Points
  • NCBA Bank acquired Unga Group’s Ksh860 million ($6.6 million) loan from Absa, expanding its foothold in Kenya’s competitive banking sector.
  • Unga Group's loans doubled to Ksh2.3 billion ($17.8 million) by June 2024, driven by elevated borrowing costs and economic challenges.
  • NCBA Group posted a 5% profit increase to Ksh9.8 billion ($75.7 million) in H1 2024, driven by strategic investments and regional expansion.

NCBA Bank, a subsidiary of the NCBA Group, a leading financial services conglomerate backed by some of Kenya’s wealthiest families, has acquired Unga Group’s Ksh860 million ($6.6 million) loan portfolio from Absa Bank Kenya, strengthening its domestic operations while reinforcing its role 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 set to mature in June 2024. Under NCBA’s revised terms, the facility has been restructured at a higher rate, with interest now pegged at the Central Bank Rate (CBR) plus a 6.35 percent margin, up from the initial CBR plus 3 percent.

Unga faces mounting financing challenges

Unga Group, a publicly listed milling company, continues to grapple with increasing borrowing costs amid a challenging economic climate. As of June 2024, the company’s total bank loans surged to Ksh2.3 billion ($17.8 million), doubling from Ksh1.1 billion ($8.5 million) a year prior due to elevated interest rates.

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

Despite these pressures, Unga managed to reduce its annual net loss to Ksh669.6 million ($5.2 million) in the fiscal year ending June 2024, compared to Ksh959.4 million ($7.4 million) a year earlier.

This improvement was attributed to lower finance 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 eyes growth

NCBA Group, formed in 2019 through the merger of NIC Bank Group and Commercial Bank of Africa, has emerged as a key player in East Africa’s financial landscape.

Backed by influential Kenyan families such as the Kenyattas, Meralis, and Ndegwas, the group continues to expand its footprint regionally, with 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 last year.

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

The acquisition of Unga Group’s loan portfolio reaffirms NCBA’s strategy of leveraging targeted investments to solidify its presence in Kenya’s financial sector while positioning itself for sustained growth across East Africa.