Nigerian lender eyes Kenyan bank acquisition

By James Anyanzwa

Guaranty Trust Bank Plc (Guaranty), Nigeria’s largest lender by market value, will open units in Kenya, Tanzania and Uganda as it seeks to expand in East Africa

Chief Executive Officer Segun Agbaje said in Lagos last week that the bank would acquire lenders that are not that large, but profitable in those countries in the short-term.

Guaranty Trust Bank, which is currently operating in six countries outside Nigeria, is targeting the East African nations owing to their “appreciable gross domestic product, growing investments and ease of doing business.

The Nigerian bank listed in the London Stock Exchange expects its planned foothold in Kenya will boost its presence in the local financial services market.

The bank, Nigeria’s largest lender by market value, told news service Bloomberg it will open units in Kenya, Tanzania and Uganda as it seeks to expand into East Africa.

The latest announcement comes in the wake of a new capital requirement introduced by the Kenyan Government, with hopes of developing a strong and competitive banking industry.

The country’s 43 commercial banks are required to have at least Sh1 billion of core capital from Sh250 million.

Although the deadline for the recapitalization was December 31, 2012 Central Bank said about six banks, which had not met the new requirement had submitted their capital build up plans.

The rule, which was introduced in 2009 has so far seen two small lenders, Equatorial Commercial Bank (ECB) and Southern Credit Bank merge under the ECB brand, citing the need to enlarge their branch network and balance sheet.

NIC Bank Group is also looking for acquisitions of smaller and weaker banks in a move seen by observers as designed to provide a gateway into the mass market.

The retail market has seen big banks such as Equity, Co-operative and Kenya Commercial banks (KCB) flourish on super-profits.

NIC Bank’s buyout plans comes even as the bank moves to strengthen its regional operations by pumping Sh608 million additional capital in its Tanzanian subsidiary — NIC Tanzanian.

The subsidiaries, NIC Tanzania and NC Uganda (which opened its offices to the public in June 2012) contributed a combined 10 per cent to the Group’s bottom-line last year.

Small banks have become attractive buys for larger banks mainly because of their customer deposits that are truly an asset to the acquirer and gathering more customer deposits versus wholesale deposits makes you a more attractive franchise.

Nigeria is sub-Saharan Africa’s biggest economy after South Africa.

The country’s lenders are returning to profitability after Central Bank of Nigeria Governor Lamido Sanusi bailed out banks, injecting 620 billion naira (US$3.9 billion.

The Government then created the Asset Management Corporation of Nigeria to buy bad debts from the country’s lenders. Guaranty Trust Bank is seeking loan growth of 20 per cent this year from about 11 per cent in 2012 and intends to invest more in large oil and manufacturing companies.