A Family Bank branch in Nairobi. The bank is seeking to close an acquisition deal in South Sudan by June next year as it seeks opportunities from Africa’s newest nation, which has boosted earnings of other Kenyan banks with regional operations. File
Family Bank is seeking to close an acquisition deal in South Sudan by June next year as it seeks opportunities from Africa’s newest nation, which has boosted earnings of other Kenyan banks with regional operations.
The bank is seeking to borrow a leaf from its rivals, Equity Bank and KCB Group, whose South Sudan operations have been generating the largest profits among their subsidiaries including those in Tanzanian and Uganda.
But unlike these banks that set up shop from scratch in south Sudan, Family is seeking a buyout to avoid struggling to lure deposits and fighting for marketshare against established rivals.
“The buy-out will help us gain acceptance in the market and cut short the investment lead time,” said Peter Munyiri, the CEO of Family Bank.
“We are studying the various options but no matter which institution we buy into, our aim is to maintain a controlling stake,” he added without giving details of its target.
South Sudan has eight commercial banks, but only four namely; Nile Commercial Bank, Ivory Bank, Buffalo Commercial Bank and Mountain Trade and Development Bank could be available for sale as they are owned by locals whose financial muscle is relatively weak.
The other three are owned by new entrants Commercial Bank of Ethiopia, Equity Bank and KCB Group who are unlikely to sell. The last is state-owned.
An acquisition provides an easy solution compared to starting from scratch, which could involve buying land, putting up buildings, hiring local staff, seeking regulatory approval, struggling to lure deposits and fighting for marketshare against established rivals.
But the high buyout prices on increased interest from Kenyan and West African investors have prompted banks to start operations from scratch.
South Sudan is shaping up as a fertile ground for growth for local and international companies after its break from the North, and Kenyan financiers are racing to seek a foothold in the market to be part of the expected boom.
For instance, KCB last year generated a profit of Sh580 million from South Sudan compared to losses of Sh409 million in Uganda, Rwanda (Sh317 million) and Tanzania (Sh110 million).
This is what is egging on Family Bank to move to South Sudan first as part of its regional expansion.
“It’s a young market that represents a lot of growth opportunities besides having fewer barriers to entry both regulatory and cultural,” said Mr Munyiri.
He added that the bank is seeking to raise about Sh1 billion from mix of debt and equity for the South Sudan buyout and expansion.
The regional market is becoming increasingly important as the East African Community (EAC) common market takes shape following its kickoff last January, paving way for free movement of factors of production in a market of 126 million people.
A growing number of mid-sized firms are lining up to join the likes of East African Breweries Ltd, Crown Berger and East Africa Cables in setting up operations in Tanzania, Uganda, Rwanda and Burundi.
Family Bank has kicked off a reorganisation plan to widen its product offering to include home loans, corporate banking and forex trading a departure from microfinance. (Read: Family Bank replaces managers in business review plan)
