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KCB plans first entry into Ethiopia, Somalia

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Joshua Oigara, Kenya Commercial Bank's chief executive. Photo/FILE

Joshua Oigara, Kenya Commercial Bank's chief executive. Photo/FILE  Nation Media Group

By BD REPORTER

Posted  Thursday, April 11   2013 at  20:13

In Summary

  • KCB said it will next year widen it international business to include entire Eastern Africa and southern Africa markets.
  • The bank, which is the only Kenyan lender to have a presence in the five countries that make the East Africa Community, plans to deepen its presence to 20 branches from the current 15.

Kenya Commercial Bank is seeking to become the first lender in the country to open foreign subsidiaries in Ethiopia, Somalia and the Democratic Republic of Congo.

The bank Thursday told Reuters that it will next year widen it international business to include entire Eastern Africa and southern Africa markets.

This is informed by the lender’s bid to reduce its reliance on the Kenyan market, which accounts for 90 per cent of the bank’s earnings.

“Next year we want to go into more markets,” the CEO, Joshua Oigara, told the Reuters Africa Investment Summit.

“Democratic Republic of Congo remains a key focus for the group. We are keen on Ethiopia, Somalia and also the southern Africa area.”

The bank, which is the only Kenyan lender to have a presence in the five countries that make the East Africa Community, plans to deepen its presence to 20 branches from the current 15.

Besides Kenya, KCB operates in Uganda, Tanzania, Rwanda and Burundi and South Sudan—which is the most profitable market of the foreign subsidiaries.

Its contribution to pre-tax profit is expected to climb to 13-15 per cent this year from eight per cent in 2012, Oigara said. The Burundi operation is said to have turned a profit in 2012 after launching in May that year.

Its top rival Equity Bank has shelved plans to open subsidiaries outside East Africa until its current foreign divisions start generating at least a quarter of its income from the current 13.5 per cent.

The bank has been keen to establish a Pan-African operations and last year mentioned plans to raise funds through a secondary public share offer to enter central, western and Southern Africa market.

“We want to pause a bit and look at our subsidiaries to help them contribute at least 25 per cent of revenues,” Equity Bank CEO James Mwangi told the Business Daily on the sidelines of the lender’s AGM on March 27.

Profits from KCB’s foreign subsidiaries increased 8.3 per cent to Sh1.2 billion in the year to December as those of Equity Bank nearly doubled to Sh1.08 billion from Sh552 million in the same period.

Kenyan firms are racing to open subsidiaries in the EAC countries with banks following suit. It has also caught the eye of CfC Stanbic Bank, Co-operative Bank and DTB.

But KCB will be the first lender to eye markets outside the EAC market. In Ethiopia, it will be taking advantage of Addis Ababa’s move to allow Kenyan lenders to open representative offices—which allows local banks to lend but not gather deposits.

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