Hold your horses, analysts tell banks on EAC expansion

“There is a clear advantage for retail banks operating in the EAC market,” said Eric Musau, a financial analyst, adding that the expansion comes at a high cost — a huge capital base.

Mr Musau said that in light of the EAC integration, small banks with national operations will need to further sharpen their focus to continue serving their niche markets.

David Mataen, the head of research at Faida Investment Bank, sees culture as the biggest threat to banks expanding in the region.

Tricky matter

He says the EAC integration is driven by economic considerations but market acceptance remains a tricky matter as the different nationals are still full of suspicion and prejudice.

Because of this, he reckons that banks that can identify opportunities that can ride above the prejudices are best placed to reap from increased intra-regional commercial activities, citing merchant banks as an example.

He says that failure to properly assess the risk in the region can be a fundamental mistake.

The loss of Sh309 million by Equity Bank from its operations in Uganda and Sudan last year is seen as a signal of the challenges that face expanding banks.