Co-operative Bank of Kenya, classified among the country’s biggest lenders, is the latest to announce plans to acquire Jamii Bora Bank, the second-smallest by market share, deepening ongoing takeovers of struggling financiers.
Co-operative Bank is Kenya’s fourth-largest lender holding assets worth Ksh450 billion ($4.5 billion), while the loss-making Jamii Bora Bank (JBB) has an asset base of Ksh12.5 billion ($125 million). The proposed transaction, which is still subject to both shareholders and regulatory approvals, will see Co-op Bank acquire 100 per cent shareholding of JBB, which controls 0.12 per cent of the market.
Last year, KCB Group — the country’s largest lender — acquired the struggling National Bank of Kenya, and is also in the process of partially taking over assets of the collapsed Chase and Imperial Banks. Commercial Bank of Africa (CBA) and NIC Bank merged during the year, creating the third-largest bank in the country and in the region by assets, NCBA Group Plc. Diamond Trust Bank also bought out Habib Bank, while Equity Bank — the second-biggest lender by assets — is in the process of taking over four banks in Rwanda, Zambia, Mozambique and Tanzania from London-listed investment firm, Atlas Mara.
MERGERS AND ACQUISITIONS
The Kenyan lenders have intensified acquisitions to bolster their balance sheets, increase efficiency and reduce operating costs to survive tough competition, which has seen revenue growth through an increase of costs of products and services become an uphill task.
The buyouts have helped the big banks to grow deposits and protect revenues that have come under pressure largely due to ballooning bad debts and the implementation of the new international financial reporting standards (IFRS) 9 that demand higher provisioning for all loans before they turn to bad.
Medium-sized lenders are also not left behind in the wave of mergers and acquisitions. I&M Bank bought out Giro Bank, Fidelity Commercial Bank (SBM), Equatorial Commercial Bank (Mwalimu Sacco) and Fina (Guaranty Trust).
The Kenya Bankers Association (KBA) — the industry’s umbrella body — says mergers and acquisitions are inevitable in the industry as lenders strive to remain viable and ensure decent returns to shareholders.
"Almost the entire market has become price conscious. It is unlikely that you will have much room in increasing the prices and hence the only option to safeguard your margins is to become as efficient as possible by looking at your cost base and business model. When you look at these options then you will find that […]