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Standard Bank’s Kenyan Unit Targets Top Three Rank in Country

Aug. 7 (Bloomberg) -- Standard Bank Group Ltd.’s Kenyan unit is targeting becoming one of the country’s three biggest lenders and may make acquisitions to achieve that goal, the division’s chief executive officer said.

CFC Stanbic Holdings Ltd., based in Kenya’s capital, Nairobi, also plans to attract rich clients and commercial customers to balance earnings that are “heavily skewed” toward corporate and investment banking, Kitili Mbathi said in an interview yesterday at the U.S.-Africa Leaders Summit in Washington.

“We are not comfortable with where we are right now in terms of market share,” he said. “If an opportunity presented itself to catapult us higher up the rankings, I’m sure it’s something we would consider. Strategically, we’d like to be in the top three.”

Kenya has 43 commercial banks along with a mortgage-finance company, nine microfinance lenders and eight representative branches of foreign banks, according to the Central Bank of Kenya. Minimum capital requirements are currently 1 billion shillings ($11 million), one of the lowest in Africa, and only once that level is increased will “real consolidation” take place in Kenya, Mbathi said.

Joshua Oigara, the chief executive officer of Kenya Commercial Bank Ltd. and head of the Kenya Bankers Association, said in an interview on Aug. 5 that capital reserve requirements should be increased more than eightfold to prompt consolidation.

‘Earnings Momentum’

CFC Stanbic, Kenya’s eighth-biggest lender by market capitalization, competes with companies including Kenya Commercial and Equity Bank Ltd., the two biggest banks. The lender is 60 percent owned by Johannesburg-based Standard, Africa’s No. 1 bank by assets. In the first quarter, CFC boosted net income by 60 percent to 1.61 billion shillings. First-half results will be published on Aug. 11.

“We’ve been on a very strong earnings momentum,” Mbathi said. “If we look at what happened in the first quarter, that momentum continued.”

CFC is boosting retail lending to help “moderate” the volatility in earnings that can result from the cyclical nature of corporate and investment banking, Mbathi said. The division is expected to start making a positive contribution to net income after being unprofitable, he said.

Beyond Kenya, Standard Bank owns the biggest bank in Uganda and plans to grow its business in Tanzania, where it operates the East African nation’s sixth-largest lender, Mbathi said. In South Sudan, the bank plans to expand once violence that erupted in December subsides, he said.

‘Devastating Impact’

The conflict began after President Salva Kiir accused his former deputy, Riek Machar, of plotting a coup, a charge he denies. Violence has pitted some members of Kiir’s Dinka ethnic group against Machar’s Nuer community, leaving thousands of people dead and displacing about 1.5 million others.

The violence has had a “devastating impact” on CFC’s business, Mbathi said.

“Business activity has declined down to almost zero,” he said. “Our business has taken a very big hit, but we’re optimistic that with peace and a long-term solution that our business will continue to thrive in South Sudan.”

The U.S.-Africa Business Forum was hosted by Bloomberg Philanthropies and the U.S. Commerce Department. Bloomberg Philanthropies is led by Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

To contact the reporter on this story: Paul Richardson in Washington at pmrichardson@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Nasreen Seria

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