Private equity deals and mergers and acquisitions are expected to play a major role in Kenyan banks' search for additional capital, as all lenders are expected to have at least Sh3 billion in core capital by December 2025.
The Central Bank of Kenya (CBK) said last week that it had written to banks asking them to provide the regulator with plans to steadily increase their minimum capital to at least Sh10 billion by the end of 2029 for those that have not reached that threshold.
“We see a number of scenarios, banks will be looking at either putting private equity in place or going to the capital markets to raise additional funding,” Kenya Bankers Association (KBA) chief executive officer Raimond Molenje told Business Daily in a Wednesday interview.
“We also cannot rule out mergers and acquisitions (M&As), which will also be on the table. We have seen this in the recent past where big banks have had an engagement with others to acquire them.”
The requirement has been phased out with lenders expected to have at least Sh3 billion each as core capital by December 2025, Sh5 billion by December 2026, Sh6 billion by December 2027 and Sh8 billion by the end of 2028.
Recent deals in the banking sector have been a combination of selling stakes to private equity firms, mergers and raising funds from the capital markets.
In December, HF Group completed a rights issue that raised Sh4.8 billion from investors, which was partly used to shore up its capital, with the company's banking unit among the 12 lenders with less than Sh3 billion in core capital as of September.
Sidian Bank, on the other hand, welcomed five new investors between October 2023 and April last year, including Pioneer General Insurance Limited, Pioneer Life Investments Limited, Wizpro Enterprises, Afrah and Telesec Africa Limited.
The private investors collectively acquired a 55.48 percent stake in the lender, which is affiliated to Centum Investment Company.
On the acquisitions front, Nigeria's Access Bank Plc announced a transaction to acquire a 100 percent stake in National Bank of Kenya for an estimated Sh13.3 billion, or 1.3 times the book value.
Meanwhile, Mauritius-based private equity fund Shorecap III acquired a 20 percent stake in Credit Bank Plc for Sh0.7 billion.
Apart from HF, other lenders with capital shortfalls as of September 2024 include Access Bank Kenya, Consolidated Bank of Kenya, Middle East Bank of Kenya, UBA, Paramount Bank, Credit Bank and Development Bank of Kenya (DBK). M-Oriental Bank Kenya, Commercial International Bank Kenya (CIB), Premier Bank Kenya and Habib Bank AG Zurich were also found to be undercapitalised.
