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KCB in talks to buy Ethiopia bank with NBK sale money
Kenya Commercial Bank (KCB) Kenya Group Finance Director Lawrence Kimathi makes his remarks during the banks Half Year 2025 Financial Results announcement on August 13, 2025 held at Radission Blu Hotel.
Photo credit: Francis Nderitu | Nation Media Group
KCB Group has initiated talks to acquire a bank in Ethiopia within the next 18 months as part of its growth and diversification strategy following Addis Ababa’s decision in June to allow foreign lenders to operate in the country.
The Kenyan bank wants to use the purchase to become one of the largest operations in a market dominated by the State-owned Commercial Bank of Ethiopia, which is the biggest bank by assets and deposits.
KCB Group’s Finance Director, Lawrence Kimathi, said the bank will use part of the proceeds from the sale of National Bank of Kenya (NBK) to Nigeria’s Access Bank to close the Ethiopia deal.
Kenyan banks have in recent years opened foreign subsidiaries in markets such as DR Congo, Rwanda and Uganda through acquisitions in the race to diversify their profits and cut reliance on local business.
Ethiopia’s banking sector had remained closed for international banks and investors until December, when its parliament approved a long-awaited law to allow foreign lenders to establish subsidiaries, open branches or representative offices, and buy shares in local banks.
Ownership of local banks by foreign strategic investors will be capped at 40 percent, the Ethiopian central bank stated in a separate directive.
KCB Group plans to acquire a maximum 40 percent stake in an undisclosed bank in Ethiopia, which has 32 lenders.
“We have visited some banks and had conversations. The market is now open and the regulator is looking forward to the first entrant,” Mr Kimathi said in an interview with the Business Daily.
“If we get a good asset that is strategically and culturally aligned, we will be happy to be the first. One thing we are clear about is that we are not going into Ethiopia through a greenfield operation.”
The shareholders of KCB Group got a windfall after the bank increased dividends 45 percent to Sh4 per share, including an interim dividend of Sh2 per share and a special dividend of Sh2 per share, in the wake of receiving billions from the sale of NBK.
The half-year 2025 interim and special dividends translate to a Sh13.0 billion payout.
The group operates in the DR Congo, Tanzania, Rwanda, South Sudan, Uganda and Burundi.
The foreign subsidiaries accounted for 32 percent or Sh9.81 billion of its Sh32.69 billion net profits for the six months to June.
The bank had earlier expressed its intention to enter Zambia and Ethiopia under its continental expansion plans via acquisitions.
“In Ethiopia, we intend to retain our model of universal banking, which places equal focus on both retail and corporate businesses to drive growth. We intend to have a heavy focus on digital because of the size of the country and the need to reach customers who are spread far and wide and the best way to do that is digitally,” Mr Kimathi said.
Ethiopia opened up its telecoms sector to foreign investors in 2022 after a consortium led by Kenya’s Safaricom launched the first foreign network in the country.
The opening of Ethiopia’s market for foreigners caps the government’s drive to attract more overseas investment into the domestic banking sector.
“A foreign bank strategic investor may be allowed to establish a wholly or partially owned foreign bank subsidiary,” said Ethiopia’s central bank.
A strategic investor may not directly hold in a new domestic bank more than 40 percent of a bank’s total subscribed shares. A natural person may not hold more than 7.0 percent of a bank’s total subscribed shares.”
In pursuing an acquisition over setting up operations, KCB is avoiding going into a head-to-head battle with established rivals in search of deposits and loan deals from scratch.
The ceiling of a 40 percent stake by a foreign entity entering Ethiopia indicates that KCB will be a significant minority in the targeted lender, a departure from the 85 percent stake it acquired in its latest acquisition of Trust Merchant Bank (TMB) in DR Congo.
The law in Ethiopia further demands that a foreign bank seeking entry must have a minimum paid-up capital of Birr 5.0 billion (Sh4.58 billion at the present exchange rate) in cash.
Despite having 32 players, the country’s banking sector is dominated by the state-owned Commercial Bank of Ethiopia, which accounts for 47.9 percent of the total industry’s asset base and 47.1 percent of total deposits.
Of the country’s 32 banks, 25 are categorised as small and account for 23.3 percent and 22.7 percent of the industry’s assets and deposits, respectively.
KCB will be banking on Ethiopia’s relatively low formal financial inclusion to unlock a new frontier for growth and expansion.
According to the World Bank, only 46.5 percent of Ethiopians aged 15 years and above own an account at a formal financial institution or with a mobile service provider, compared to Kenya’s 79.2 percent.
The latest data from Ethiopia’s central bank shows that the total asset base of the country’s commercial banks stood at Sh2.99 trillion as at the close of 2024, compared to Kenya’s Sh7.56 trillion.
Ethiopia’s banking sector loan book stands at Sh1.32 trillion against Kenya’s Sh4.07 trillion.
KCB Group set up a representative office in Ethiopia in October 2015 as a launch pad for potential entry into the market upon liberalisation.
Entry into Ethiopia will mark an extension of the group’s recent foray across the Eastern African region, with the latest acquisitions being in DR Congo, where it acquired TMB, and in Rwanda where it acquired BPR and integrated it into KCB Rwanda.
In March, KCB Group acquired a 75 percent stake in fintech entity Riverbank Solutions, whose core business is in payment solutions across sectors.
