A Kenya Commercial Bank branch in Nairobi. The bank is seeking to boost its presence in the regional market with further investments as part of its strategy to expand in Africa. Photo/File
The Kenya Commercial Bank (KCB) Group is considering buying out a bank in Uganda to shore up its market share in the country.
East Africa’s biggest lender by asset base disclosed the plan during a briefing with research analysts last week.
“Management also noted that KCB’s focus was to have at least 10 per cent share in all markets it operates in. To this end, management hinted on possible acquisitions, especially in Uganda,” said Standard Investment Bank in a note to investors.
The Business Daily could not get comments from the KCB chief executive, Mr Martin Oduor-Otieno, as his phone went unanswered.
Investment analysts, who attended the briefing by KCB management, told the Business Daily that the slow growth of the personal and mortgage loans in Uganda had limited KCB’s reach to corporate clients, a situation the lender is determined to change.
The bank has a two per cent market share in Uganda and three per cent in Tanzania, compared to 14 per cent in Kenya, 40 per cent in South Sudan and seven per cent in Rwanda.
The acquisition is, however, seen as a lesser priority for the bank given that it has already broken even in Uganda.
The bank recently entered Burundi and is still eyeing other markets such as South Africa.
“Such a move would also impact on its cost-to-income ratio, which is not one of the best in the market,” said Vimal Parmar, an analyst with Kestrel Capital.
He said that even though it may be a good strategy that shows the lender’s aggressiveness, it would prompt KCB to return to the market in search of additional capital since it was already involved in other investment ventures.
The bank entered Uganda in 2007 by setting up a new operation and it took it five years to break-even.
Turned profitable
Equity Bank, on the other hand, acquired Uganda Microfinance Limited, which turned profitable last year.
Last year, KCB injected Sh1.8 billion capital into its subsidiaries to support their growth. KCB Uganda received Sh1 billion, KCB Rwanda was granted Sh600 million and KCB Tanzania received Sh200 million.
KCB Tanzania, with 11 branches, reported a profit before tax of Sh46.5 million against a loss of Sh111 million the previous year.
KCB Uganda, with 14 branches, also broke even to register a profit before tax of Sh26.7 million against a loss of Sh409.3 million in 2010.
KCB Rwanda, with nine branches, similarly registered a profit before tax of Sh117.7 million against a loss of Sh317.5 million in 2010.
In its annual report, the bank states that it still has ambitions of expanding further.
Chairman Peter Muthoka says: “Over the coming years, in line with our pan-African agenda, the bank shall explore the prospects for expansion in the greater East African region. We believe KCB has the potential and capacity to support African businesses and boost the integration of our various common markets.”
