Absa Considers Kenyan Bank Acquisitions Amid Regional Growth

Absa executives recently concluded a three-day visit to Kenya, engaging with regulators and private sector representatives. The South African lender is exploring potential acquisition opportunities within the country as the banking sector undergoes consolidation.

Group CEO Kenny Fihla and Group Executive for Africa Regions Charles Russon were present during the visit. The trip reflects Absa’s strategy to diversify earnings and expand its presence in Kenya, reducing reliance on South Africa and Ghana.

Kenya as a Priority Market

Kenya is identified as a priority growth country within Absa’s Africa regions portfolio due to its scale, influence, and diversified economy. The country exhibits a strong entrepreneurial spirit, vibrant small and medium-sized enterprise (SME) activity, and growth in sectors such as agriculture, infrastructure, trade corridors, energy, and the public sector.

Potential Acquisitions and Regulatory Changes

Absa is considering acquisition options to expand its lending capacity, targeting both households and small businesses. The recent Business Laws (Amendment) Act in Kenya, which increases the minimum core capital requirement for banks to KES10bn by the end of 2029, is expected to drive market consolidation. Absa has expressed interest in potential opportunities that may arise as a result of these regulatory changes.

Industry Consolidation and Existing Presence

The 14 largest banks in Kenya control 87% of sector assets. Fitch Ratings suggests that the remaining 17 banks, representing only 7% of sector assets, are unlikely to meet the new capital requirements through earnings alone. Absa currently operates a Kenyan subsidiary with an asset base of $4.29bn, holding a 65% ownership stake while assuming 100% of the risk. The bank is exploring ways to improve capital efficiency.

Expansion in East Africa

Absa’s East Africa portfolio expansion includes the acquisition of Standard Chartered Bank Uganda’s wealth and retail banking business portfolio in Uganda last year. The company also views Uganda and Tanzania as compelling business propositions, citing GDP growth above 5% and strong performance across multiple sectors. Absa owns two banks in Tanzania and anticipates sharing updates regarding consolidation efforts at an appropriate time.

Recent Activity by Other Banks

The visit by Fihla and Russon follows a similar trip by Standard Bank executives, who also met with Kenyan regulators and the central bank governor, Kamau Thugge. Nedbank previously announced a proposed purchase of a controlling stake in NCBA for R13.9bn.