NAIROBI (Reuters) – Kenya’s KCB Group is looking at medium-sized lenders to buy as part of an expansion plan and is building up capital to boost its acquisition war chest, the chief executive of country’s biggest bank by assets said on Friday.
With 43 commercial banks, executives say, Kenya’s banking industry is ripe for consolidation that will create fewer bigger institutions able to write bigger loans for the growing economy.
“We will look for businesses where there can be synergy, where there can be ability for us to scale up, so medium-sized banks will be areas that we are focusing on today,” KCB CEO Joshua Oigara told Reuters in an interview.
KCB planned to sign up a transaction adviser to raise the bank’s capital before the end of this month, he said, although he did not say how much the bank was seeking. KCB’s total capital stood at 79 billion shillings ($779.48 million) at the end of last year.
“That scaling up of capital is actually part of the preparation for that (potential acquisition),” he said, adding that he was interested in Kenyan lenders.
But he said KCB was not looking at any parts of Barclays Africa Group that could come up in the wake of Barclays Plc’s decision to reduce its stake.
Kenya’s Equity Bank had said earlier this week that it could be interested in some Barclays assets.
Oigara said KCB expected strong growth in its Tanzania and Rwanda businesses, helping offset the impact of a downturn facing its unit in conflict-torn South Sudan, which contributes 8 percent of the group’s annual revenue.
Authorities in South Sudan, whose economy has been ravaged by fighting since December 2013, abandoned its fixed exchange rate in December and floated the pound, leading to a big devaluation and putting pressure on KCB’s balance sheet.
“For this year our plan is that Kenya, Uganda, Rwanda and Tanzania will actually deliver a growth that will compensate the challenges we see in South Sudan,” Oigara said.
Growth in Rwanda is driven by lending to small- and medium-sized enterprises, while the Tanzanian business is benefiting from an expansion of Kenyan firms into that market, he said.
In Kenya, KCB’s biggest market, the cost of funds for banks has eased after a spike in interest rates and volatility last year, he said, adding that a more stable environment would help lead to lower commercial lending rates.
Businesses and the central bank have complained in the past about high corporate lending rates.
“It is also already clear we are going to see lower interest rates because the cost of funding is now coming down from what we saw last year,” Oigara said.
Parliamentarians are seeking to impose a cap on rates that banks can charge. But Oigara said imposing such constraints would simply force banks to cut the amount of lending, starving businesses of credit and reducing investment.
($1 = 101.3500 Kenyan shillings)
(Editing by Edmund Blair/Mark Heinrich)
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