Ecobank set to open investment banking arm

Ecobank CEO Ehouman Kassi. He says the bank is hopeful of securing regulatory approval in a month. Photo/FILE 

By CHARLES MWANIKI

In Summary

• The bank joins a growing list of lenders diversifying into transaction advisory services with an eye on commission earnings from mega deals expected from recent discoveries of minerals and oil.
• Banks now own nine out of the dozen licensed investment banks. Other lenders with investment banking subsidiaries include Barclays, NIC, CFC Stanbic, Commercial Bank of Africa, ABC, Equity, Cooperative and Chase Bank.

Ecobank will open its Kenya investment banking arm by June this year as it looks to enter the lucrative deal making segment.

The bank joins a growing list of lenders diversifying into transaction advisory services with an eye on commission earnings from mega deals expected from recent discoveries of minerals and oil.

Ecobank chief executive Ehouman Kassi said the bank had applied for regulatory approvals and was hopeful of securing the licences in a month.

This would see the unit operational by the end of June, with a team of five.

Ecobank acquired Iroko Securities in July last year saying it would be converted into an investment bank.

“We acquired a company with a capital of less than $100,000 (Sh8.6 million). We took the last quarter of 2013 to raise the capital to the CMA requirement and started the request for approval in November,” said Mr Kassi. Investment banks require a minimum capital of Sh250 million to be licensed.

READ: Ecobank eyes investment banking after buyout deal

Mr Kassi said the unit would focus on raising debt for East Africa’s oil, telecommunications, commodities and power sectors rather than the equities market where there is a crowd of advisers.

The bank is looking to inject Sh8.6 billion ($100 million) into its Kenya operations this year after putting $100 million (Sh4.3 billion) into the Tanzanian and Ugandan operations last year.

Last week CMA granted an investment banking licence to KCB Capital, a subsidiary of KCB, marking the listed lender’s return to the segment since selling Dyer and Blair to billionaire Jimnah Mbaru in the 1983.

READ: KCB makes comeback to the capital markets

Banks now own nine out of the dozen licensed investment banks. Other lenders with investment banking subsidiaries include Barclays, NIC, CfC Stanbic, Commercial Bank of Africa, ABC, Equity, Co-operative and Chase Bank.

There are also 11 licensed stockbrokers. Kestrel Capital chief executive Andre DeSimone said commercial banks were seeking to leverage on their existing relationships with many companies who run accounts with them.

“That is their first, most obvious target client base. However, there are sometimes inherent conflicts of interest in terms of the bank being both a provider of capital and an independent financial advisor,” said Mr DeSimone.

Increased corporate activity in Kenya has created room for more players in the investment banking industry where competition is expected to revolve around serving institutional investors and securing privatisation and merger advisory services.