Global banking conglomerate HSBC is shutting down its Nairobi office three years after it kicked off operations. HSBC opted to exit Kenya as part of the group’s restructuring that has seen it scale down operations in all its market.
International media early last year reported that Europe’s largest bank would cut 14,000 of its 240,000 global workforce as it struggles with high compliance costs. The Central Bank of Kenya (CBK), the industry regulator, said HSBC had started clearing out.
“HSBC has therefore in the context of this global restructuring exercise decided to scale down its presence in Africa, including the Representative Office in Nairobi.
“The Office is in the winding down stage and the Central Bank will inform the market when the Office is formally closed and all regulatory requirements have been complied with,” said the CBK in a statement.
In 2011, HSBC opened office to serve the East African region with Jaap Van Luijk appointed to head regional operations. The bank has since closed 63 other units. Analysts said at the time the bank was positioning itself to participate in mega infrastructure deals that are in the pipeline.
Regional governments are expected to continue heavy investments in roads, power, pipelines, dams and other infrastructure and most of the funding for these projects is expected to come from the private sector.
FirstRand Bank Limited, Bank of China Limited, Central Bank of India, Bank of Kigali, JP Morgan Chase and Rabobank Nederland are the other banks to have opened representative offices after HSBC, also seeking business from financing deals.
HDFC Bank and Sandton, Johannesburg-headquartered Nedbank are the only other international banking groups that had opened representative offices ahead of HSBC.
London-based Ghana International Bank recently signed a deal with local-based Benaba Ltd to open a representative office. Despite HSBC’s exit, its peers have said they are toying with the idea of expanding operations and probably opening fully-fledged branches.
In February, Bloomberg reported that FirstRand was mulling whether to expand local operations. The agency reported that the South African bank’s interest had been spurred by the increase in financial services accessibility made possible by Safaricom’s mobile money transfer service, M-Pesa.
In the absence of a fully-fledged branch, the South African bank listed on the Johannesburg Stock Exchange, has been using its representative office to do deals. “Kenya representative office is generating cross-border deals into both east Africa and Asian corridors,” said a 2013 investor report by FirstRand.
Dubai Islamic Bank of the United Arab Emirates has also applied to the CBK for a licence. Originally Hong Kong Shanghai Banking Corporation, HSBC still earns the bulk of its revenues from Asia.