Kenyan commercial banks are coming under pressure to merge and
create entities large enough to survive financial crisis in the wake of
stricter regulatory and competitive landscape.
Analysts
have cited merger talks between NIC Bank and Commercial Bank of Africa
(CBA), which if successful will create the third-largest lender by
assets as a potential new trend.
“The smaller banks are
at this stage trying to move water uphill as they get crushed without
products, without pricing power and without customer loyalty. The small
ones for example less than Sh20 billion in deposits need to merge, cut
costs and develop product and fee capability,” said Deepak Dave, a risk
management expert with Nairobi based Riverside Capital Advisory.
“The ground has shifted beneath the industry's feet. Every bank
board needs to look five years ahead rather than one quarter ahead.”
According
to Kunal Ajmera, the chief operating officer at Grant Thornton a merger
would give especially small lenders the ability to compete, provide new
products, expand in local and overseas markets, acquire
state-of-the-art technology, bring in skilled staff and reduce operating
costs.
“There are too many banks for an economy the
size of Kenya and with the new capital requirement many smaller banks
are finding it hard to survive,” said Mr Ajmera.
“Also
interest rate cap has reduced commercial lending. Banks are being too
cautious to lend so smaller banks are of course feeling the
repercussions.”
Banks were in September spared a law
that would have compelled them to increase core capital from Sh1 billion
to Sh5 billion over the next four years after MPs voted to reject
amendments to the Finance Bill, 2018.
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