Nigerian banks are expanding their footprints in Kenya where the industry is ripe for deals and an economic contraction might still be avoided.
It will also offer lenders from Lagos a reprieve from scorching rules that are far more onerous than what their counterparts in Nairobi have to contend with, Adesoji Solanke, director for frontier and sub-Saharan African banks equity research at Renaissance Capital told Bloomberg.
“Nigerian banks are faced with a very punitive regulatory environment at home, so their thinking is to potentially scale-up their operations out of Nigeria so that those can contribute significantly more to their group revenue and profit,” he said in an interview.
Nigerian banks need to hold 27.5% of their cash as reserves, six times that of their Kenyan counterparts, while at the same time having to extend 65% of their deposits as loans.
Kenya has too many banks relative to size of the population, meaning more consolidation is inevitable following at least five takeovers over the past year, Solanke said. There is a concentration of a few big banks at the top and a long tail of small- and mid-sized firms, he said.
“You would likely continue to see international banks trying to find ways to either get into the market by buying one of the banks in the country, or where they do have operations currently in the country, trying to scale-up their existing businesses,” Solanke said.
There has been a plethora of attractive bank deals in Kenya in the last one year.
Last month, the Central Bank of Kenya approved Co-operative Bank of Kenya Ltd.’s purchase of 90% of Jamii Bora Bank Ltd., now renamed Kingdom Bank Ltd.
Nigeria’s Access Bank Plc earlier this year bought Transnational Bank Ltd and this was after
KCB Group Plc completed the takeover of National Bank of Kenya Ltd.
In May, the central bank said KCB will buy some of the assets and liabilities of failed Imperial Bank and NIC Group Plc and Commercial Bank of Africa merged last year to .
NIC Group Plc and Commercial Bank of Africa Ltd. last year to create NCBA Group Plc, now the country’s third-largest bank.
Nigeria’s Guaranty Trust Bank Plc, the West African nation’s biggest lender by market capitalization, also operates in Kenya, having acquired Fina Bank Group in 2014.
