Ecobank to inject Sh8.8bn in Kenya unit for expansion
An Ecobank branch in Nairobi. The bank has received a capital injection of Sh8.8 billion. Photo/FILE
What you need to know:
The Sh8.8 billion injection will come in phases starting this year, with Sh2.2 billion ($25 million) having already been put in the business in recent months.
Under the East African cluster, the bank puts Kenya, Uganda, Tanzania, Rwanda, South Sudan and Ethiopia.
The source of the funds for the recapitalisation is not yet decided; but the bank has ruled out equity injection as the company does not intend to dilute the shareholding of existing investors.
Ecobank has announced plans to inject Sh8.8 billion ($100 million) in its Kenyan business in the next two years to give the lender muscles to compete with better capitalised rivals.
Ecobank is one of Africa’s largest lenders with a presence in more than 30 countries, but its Kenyan unit has reported mixed performance since entry in 2008.
The Sh8.8 billion injection will come in phases starting this year, with Sh2.2 billion ($25 million) having already been put in the business in recent months.
Besides being spent on expansion, the cash will also help Ecobank Kenya to remain within the capital requirements of the Central Bank of Kenya.
The Ecobank Group chief executive officer Albert Essien said the investments will also strengthen Ecobank Kenya’s position as the hub for eastern Africa regional operations. Under the East African cluster, the bank puts Kenya, Uganda, Tanzania, Rwanda, South Sudan and Ethiopia.
“We have strengthened management and injected $25 million of additional capital into Ecobank Kenya. The group intends to further capitalise the Kenyan business in 2014 so it can act as a strong hub for our operations in the region,” said Mr Essien.
The commercial bank, which started operations in Kenya in 2008, is growing its presence in the rest of the eastern Africa region with Sh22.44 billion ($150 million) investment as capital.
The source of the funds for the recapitalisation is not yet decided; but the bank has ruled out equity injection as the company does not intend to dilute the shareholding of existing investors.
“We will be using use non-dilutive funding. So we are looking at tier two capital. That could come from development finance institutions or other sources. We haven’t yet decided,” said Mr Essien.
The bank is keeping on its expansion path around East Africa and other parts of the continent. Mr Essien said that the group would also develop its investment banking operations having already acquired Iroko Securities, which was in financial advisory focused on Africa, but based in London.
Last year, it started operations in South Sudan and is set to open a new representative office in Ethiopia this year, countries that it noted have expressed interest in joining the East African Community.
“This (Ethiopia and South Sudan) presents major trade and banking opportunities for Ecobank in the longer term as well as the potential to reach out to the unbanked population in both countries with mobile banking and microfinance services,” said the bank’s group CEO.
Last year, Ecobank narrowed its losses in the eastern African region to Sh1.1 billion ($12.5 million). In Kenya, the after-tax loss stood at Sh890 ($10.2 million) in 2013 from Sh1.1 billion the previous year.
