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Two of Kenya’s largest lenders are increasingly looking at opportunities across the borders to expand their balance sheets and increase their regional relevance.
Coming hot on the heels of its acquisition of a majority stake in Banque Commerciale Du Congo (BCDC), which has since been renamed EquityBCDC, Equity Bank is now eyeing new opportunities in Ethiopia.
On the other hand, Kenya Commercial Bank (KCB) has its eyes trained on Rwanda and Tanzania. The lender is at an advanced stage of acquiring stakes in Banque Populaire du Rwanda (BPR) and Tanzania’s BancABC.
The appetite for regional expansion is fueled by ongoing reforms in the region. With the liberalization of the telecommunications sector in Ethiopia, Kenyan banks such as KCB and Equity which have representatives in the country are now waiting on the wings and hoping on leveraging on resultant technology to extend their influence in that market.
Commenting on this during the release of Q1 financial results, Equity Bank CEO James Mwangi said, “We have ears on the ground. And I think what the ground is saying, is that it is just a matter of time before the financial sector is liberalised.”
“Evolving economic, social, political governance reforms and environment have strengthened prospects for long-term sustained regional growth and investment, This coupled with the development of physical and soft infrastructure enhance opportunities for private sector credit growth and productivity gains from cross border trade,” he added.
The improving business environment between Kenya and Tanzania after years of frosty relationship is also driving the appetite for investors in that market.
Players in the financial sector are hoping to gain from the tripartite East African Crude Oil Pipeline project agreement (EACOP) signed between Tanzania, Uganda, and a number of oil companies.
With a population of about 90 million, almost half of whom are young people living in urban centers, the DRC is another lucrative destination for Kenyan lenders. The prospects are even higher with the US expected to reinstate DRC’s eligibility for trade preferences under the African Growth and Opportunity Act (AGOA).
In the first quarter of 2021, Equity Bank’s regional subsidiaries registered resilience and robust growth to contribute 40 per cent of total deposits while KCB Group recorded a net profit of 6.37 billion. this marked a 1.7 per cent increase from 6.26 billion shillings reported same period last year.
According to the 2020 Bank Supervision Annual Report by the Central Bank, cross border banking by some Kenyan banks has expanded in the EAC partner states and the DRC. The banks include KCB, Diamond Trust Bank and NCBA.
Others are Guaranty Trust Bank Kenya, Equity Bank, I&M, ABC Bank and Cooperative Bank. These banks have positioned themselves to capitalize on the growing cross border trade flows.
Despite the challenges of the Covid-19 pandemic that slowed down economic activities globally, Kenyan banks continued to grow their regional footprints. As of December 31, 2020, the total number of branches of Kenyan banks subsidiaries in the EAC Partner States and DRC grew by 8.5 percent from 316 branches recorded the previous year to 343 recorded as at December 31, 2020.
The growth was mainly driven by Equity Group Holding Plc’s acquisition of BCDC. However, two other banks, KCB and Guarantee Trust Bank , scaled down their branch network in the region.
