Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.


Kenyan Takeovers in Flight to Safety

16 April 2016, 18:28

Nairobi - A series of bank failures is set to trigger a wave of mergers and acquisitions among Kenyan lenders as depositors seek safety in the biggest financial institutions.

Consolidation is inevitable in the $61 billion economy, where 42 banks serve 44 million people, compared with 22 banks in Nigeria, which has a population of 180 million and gross domestic product that is nine times bigger, according to Cytonn Investments Management Ltd., a Nairobi-based money manager.

The nation’s regulators were forced to step in with emergency support to stem depositor panic after the collapse last week of Chase Bank Kenya Ltd., the third lender to be placed under statutory management since August.

“We are on the cusp of a market-led consolidation,” said Aly-Khan Satchu, chief executive officer of Rich Management, a Nairobi-based adviser to companies and wealthy individuals. “The issue for the central bank is to keep it orderly and avoid a disorderly Darwinian situation.”

The nation’s largest banks -- from KCB Group and Equity Group Holdings Ltd. to the local units of Standard Bank Group Ltd., Barclays Plc and Standard Chartered Plc -- will benefit as customers move cash from smaller, mostly family-owned lenders which don’t trade their shares publicly, according to Exotix Partners LLP. That won’t help smaller lenders starved of liquidity, with 80 percent of the system’s cash locked in the seven biggest banks.

‘Flight to Quality’

“There should be a flight to quality,” Ali Khalpey, head of equities for London-based Exotix, said in an interview in Nairobi. “If people start losing their deposit base, that’s consolidation for you already.”

KCB, the owner of Kenya’s largest lender by assets, is emerging as a potential play maker in buyouts. “We are looking at whether it presents an opportunity that matches KCB strategy,” Chief Financial Officer Lawrence Kimathi said in a conference call Wednesday.

The Nairobi-based unit of London-based Barclays, which is planning to trim its investments in Africa, will focus on expanding existing operations rather than making acquisitions, Chief Executive Officer Jeremy Awori told reporters on Wednesday.

M&A deals have already started happening. I&M Holdings Ltd., Kenya’s No. 6 lender by assets, offered to buy Giro Commercial Bank Ltd. for an undisclosed amount to add seven branches and bolster its short-term lending business. Mwalimu National Sacco Ltd., the country’s largest savings and credit co-operative, acquired 51 percent of Equatorial Commercial Bank Ltd. in October.

Since taking office in June, Central Bank of Kenya Governor Patrick Njoroge has improved oversight by demanding better corporate governance standards, restricting new banking licenses and increasing capital reserve requirements.

Stronger Industry

“The collapse and consolidation of some of Kenya’s small and medium-sized banks might even create a stronger banking sector replacing small, weak banks, with larger, more stable ones,” John Ashbourne, an Africa economist at London-based Capital Economics Ltd., said in an April 12 note. “All three of the recent bank runs were prompted by unprofessional or unethical activity at relatively small banks, which are unlikely to be repeated in larger, more systemically important firms.”

A run on Chase Bank, which was Kenya’s 11th largest at the time it was placed into receivership on April 7, gathered pace as the lender’s chairman and group managing director resigned shortly after announcing restated earnings with a qualified audit opinion. Imperial Bank Ltd. was seized by regulators in October amid claims of fraud that company executives deny. In August, Dubai Bank Kenya Ltd. collapsed after it breached daily cash-reserve-ratio requirements.

“A few more banks may well suffer similar internal problems,” Ashbourne said. “We do not believe that a wide spread crisis is likely.”

- Bloomberg

Tags economy

Read more from our Users

Submitted by
S Mbinya
What To Do If She Has A Boyfriend

Here are tips to help you get a girl who has a boyfriend: Read more...

Submitted by
George Vodongo
Kalonzo blasts DP Ruto for ‘grabb...

11 Kamba MPs declared their allegiance to Jubilee last month. Read more...

Submitted by
George Vodongo
President Uhuru Kenyatta pardons ...

President Uhuru Kenyatta on Thursday released 7,000 petty offenders to create room in the prisons. Read more...

Submitted by
Ben Wangui
Why Mashujaa Day celebrations wer...

Find out why this year's Mashujaa Day celebrations were held in Machakos. Read more...

Submitted by
S Mbinya
Foods that burn belly fat fast

You can take your best foods and snacks and still be able to get rid of that pot belly. Read more...