Banks' Mergers to create regional behemoths
|Joshua Oigara: CEO KCB Group|
This is the year of Mergers and Acquisitions in the financial and telecoms sectors in Kenya. According to the scheme of things, these marriages must be consummated by the end of this year. Finance and Telecoms are the vibrant sectors of the Kenyan economy. The mergers will produce titans, especially in the financial sector, dwarfing their competitors.
In the financial sector, Kenya’s largest bank by assets, Kenya Commercial Bank will acquire a 100 percent stake in National Bank of Kenya in a share swap.
Another group, the NIC group will merge with Commercial Bank of Africa, also, in another share swap, creating the third-largest banking group with more than 100 branches in the country and the East Africa region.
These acquisitions will place the Kenyan financial market firmly in the hands of indigenous banks. Local banks have swiftly shunted local branches of Multinational Banks, such as Barclays Bank and Standard Chartered Bank to the lower ranks of dominance in the local and regional financial markets. These are now the fifth and sixth largest banks in Kenya, having ceded their leadership perch to four locally incorporated banks.
The acquisition of the National Bank by Kenya Commercial Bank will create a behemoth in the region’s financial sector. It will add another 71 branches to KCB’s 175 in Kenya making it the largest bank in terms of reach. Although some of the 301 branches in East Africa, could end up being closed, KCB group will still be a behemoth. In addition, it will bring an additional asset base of US$1.14 billion to KCB group’s $7.46 billion created a behemoth worth US$8.6 billion.
Another merge between the NIC group and CBA group will create the largest bank in Africa with 41 million customers. Even then, it will rise to the third largest bank group in Kenya behind KCB group’s closest competitor, Equity group which has 289 branches in East and Central Africa, pushing Co-op Bank to the fourth position. Equity Bank Group’s capital base is the second largest in East Africa standing at US$6.38 billion. The marriage will place Kenya's financial sector firmly in the hands of indigenous hands.
|James Mwangi: CEO Equity|
The acquisitions in the financial sectors are not confined to the local market. Equity Bank, the second-largest bank in Kenya, has entered into a US$105 million share-swap agreement to acquire four branches in the region from Atlas Mara, ATMA. The four branches are in Tanzania, Rwanda, Mozambique, and Zambia. The acquisition will mark the entry of Equity group into Zambia and Mozambique.
It is also expanding its footprint on DR Congo with the acquisition of the second-largest bank in that country, Banque Commerciale Du Congo, BCDC. The bank has 29 branches across the country including key cities Kinshasa, Goma, and Lubumbashi. It has an asset base of about $700 million. This adds to the 2015 acquisition of the seventh-largest Bank in DRC, ProCredit Bank. The new acquisitions could catapult Equity to the Pole position in terms of assets expected to hit US$10 billion at the end of the year.
The resultant behemoths will dwarf their competitors in East Africa, making Kenyan banks, the dominant players in the region. KCB group’s asset base of US$8.6 billion is larger than the four top banks in Uganda and Tanzania combined whose asset base stands at US$7.24. The largest Tanzanian bank, CRDB, holds an estimated $2.52 billion worth of assets followed closely by NMB with an estimated $2.36 billion. In Uganda, Stanbic Bank controls $1.5 billion in assets, followed by Centenary Bank with $866 million, reported
Since all the merging banks have branches in the region, the financial market in East Africa too will be dominated by Kenyan banks.
The expansion into DR Congo and Ethiopia by both KCB and EGH will pit the master and his apprentice. The KCB Group Chief Executive, Joshua Oigara, cut his eyes in the Banking sector at Equity Bank, under the pupilage of James Mwangi, the CEO of the Equity bank group. EGH, headed by Mr. Mwangi, is gunning to be the largest bank in East and Central Africa when its assets grow to US$10 billion.
And in the telecommunications sector, Telkom Kenya and Airtel, will merge to form the second largest Mobile services provider in the Country, after Safaricom.
Safaricom, the most profitable company in East Africa, is a pioneer in innovation. It was the first in the world mobile money transfers with M-Pesa which came life in 2007. It boasts of 27 million subscribers in a country of 55 million people. The competitors, Airtel and Telkom Kenya, boast a combined subscription base of 17 million people.
It remains to be seen how the merger will affect Safaricom’s dominance in the telecoms’ sector. However, the behemoth, analysts say, should now set sights beyond the borders, targeting underserved markets such as Ethiopia, South Sudan and DR Congo.