NAIROBI, Kenya / AfricaWire.IO / – South Africa’s FirstRand, the second-largest lender in Africa, has joined a growing list of continental banks seeking to buy into Kenya’s banking industry. Half of Africa’s top 20 banks are building a multi-billion-shilling war chest for the market. They are injecting capital into Kenyan subsidiaries, bidding for stakes in local lenders or closing buyouts. Local shareholders stand to pocket billions of shillings as competition for deals heats up.
FirstRand has signalled a preference for a mid-sized bank. Chief executive Mary Vilakazi said the group is looking in East Africa but needs a willing seller at the right price and will not overpay. The lender has had a representative office in Kenya since 2012. It is also considering other routes into the market, including insurance and investment banking. Standard Bank Group, Nedbank, Zenith, CIB Egypt, Access Bank and Absa Group are also scouting for stakes or adding capital.
Kenya serves as a gateway to the East African Community, where economies are expanding by at least 5% a year. Strong regulation, easy dividend repatriation and a freely traded shilling make it attractive to foreign banks. The country is also a regional hub for travel and for exports such as coffee. Kenyan lenders have outperformed, posting average returns of 23% over five years against 16% for South African banks.
Capital rules open acquisition windows
A requirement for banks to raise minimum core capital from Sh1 billion to Sh10 billion by 2032 is expected to drive further consolidation. Treasury extended the deadline from 2029 in June and dropped the annual milestones, leaving about 23 small banks still below the threshold. Shadrack Manyinsa of Pergamon Investment Bank said the review continues to create acquisition windows for large African banks. He added that the Kenyan market still provides exceptional returns.
Government asset sales could add to the opportunities. The National Treasury is seeking to raise funds by selling strategic assets. The state owns Development Bank of Kenya and Consolidated Bank of Kenya, and holds 19.7% of KCB Group, the largest bank by assets. The push comes as African financial institutions seek greater influence, including through plans for an African credit rating agency.
Nedbank and Access lead recent deals
Nedbank, the fifth-largest lender in Africa, completed its purchase of a 66% stake in NCBA Group in October in a deal worth about Sh110 billion. NCBA keeps its name, Nairobi headquarters and local management. Nigeria’s Access Bank bought National Bank of Kenya from KCB Group last year and plans to merge the two banks. Zenith has agreed to buy Paramount Bank, and Absa has lifted its stake in its Kenyan arm to about 72%.
Breaking into the market remains difficult. Many continental banks are still classified as Tier III lenders years after arriving, as Equity Group, Co-operative Bank and KCB Group dominate with large customer bases and mobile platforms. Melodie Ndanu of Standard Investment Bank said domestic incumbents benefit from deep branch, agent and mobile money networks built over decades. Analysts say buying another large Kenyan bank would come with a heavy premium.