NIC is a mid-sized lender while CBA is ranked among the top banks in the East African nation. The potential merger would be the first major deal announced in the industry since the government capped commercial lending rates in 2016.
"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," they said.
The transaction, which would be subject to shareholder and regulatory approval, would allow both banks to invest in new technology, boost products for customers, and generate higher returns, they said.
(Reporting by Duncan Miriri; Editing by Kirsten Donovan)