Business
Kenyan banks, awash with cash, looking to expand beyond East Africa
But even as Kenyan banks look to venture outside the region, analysts say they will need to refine their strategy given their relatively limited success in the East African market.
While the regional market remains under-banked, less than 40 percent of Tanzanians and slightly above 40 percent of Ugandans have access to formal banking – Kenyan lenders have struggled to grow their industry market and profit share.
Four of the nine Kenyan banks operating in Uganda reported losses. The banks that found the going tough included National Industrial Credit, Commercial Bank of Africa, Bank of Africa and Imperial while Kenya Commercial Bank, Equity Bank, DTB, ABC and Guaranty Bank, formerly Fina Bank, all made profits.
Overall, the 11 Kenyan banks with subsidiaries outside the country made a pre-tax profit of US$59 million in the year to December 2013, compared with US$58 million in the same period in 2012.
Part of the reason is the concentration in the region’s banking sector. For example, in Tanzania, the CRDB Bank and NMB bank control over 40 percent of the country’s banking assets. In Malawi, Standard Bank and National Bank control 52 percent of the country’s banking assets.
The banks will also have to prepare for volatile country and regulatory risks. For example, according to data from the Malawi Reserve Bank, the average lending rate in the country was 37.13 percent in March, compared with an average of 19 percent in the region. The country’s high lending rate has pushed non-performing loans to 15 percent.
Moreover, the Malawi kwacha has been volatile, shedding 10 percent of its value in the 6 months to March.
But despite the risks in these new frontier markets, there is immense opportunity. For example, the Malawi Reserve Bank puts the return on assets in the Malawian banking sector at 5.3 in 2013. The 2013 return on assets for Kenyan, Uganda, Tanzanian and Rwandan banks stood at 3.5, 2.6, 1.6 and 1.2 per cent respectively.
Republished from The East African
