Kenyan banks face pressure as African giants invade turf

The banking sector is expected to witness an increase in competition as more pan-African lenders enter the local market.

The entry of Commercial International Bank (CIB) of Egypt and Access Bank from Nigeria into the Kenyan market signals a shift in the banking landscape.

CIB, Egypt’s most profitable commercial bank for over four decades and Access Bank, both prominent players in the African banking sector, have amassed substantial cash reserves to enable them seize unexpected opportunities, such as acquisitions. The Egyptian bank entered the Kenyan market by fully acquiring Mayfair Bank for a total of $40 million (Sh5.3 billion) this year.

Capital Market analysts predict that their entry in local market will bring new dynamics. They reckon that CIB is strategically targeting a specific clientele at a time Access Bank is expanding its influence in the East African region through acquisitions.  This indicates a shift towards more targeted banking services and increased intra-African investment.

“CIB bank aims to support specific sectors, businesses, or individuals interested in investing in Kenya and Egypt, instead of pursuing aggressive expansion or competitive pricing,” says Faith Atiti, head of research and analysis at DTB Kenya.

According to Churchill Ogutu, a lead economist at IC Group, both lenders aim to establish a firm presence in sub-Saharan Africa, especially the Eastern African region, where their presence is limited.

“Access Bank is aggressively expanding across Africa, having acquired Standard Chartered operations in African economies. This speaks of its expansion driven African footprint,” he adds.

Broadening  presence

The lender has acquired SCB’s operations in Angola, Cameroon, The Gambia, Sierra Leone and Tanzania.  With over 600 branches in 12 countries, it has been significantly broadening its presence on the African continent since 2019 when it acquired its Nigerian rival Diamond Bank.

Access Bank’s entry into Kenya began in 2020 when it acquired Transnational Bank. It is now in the process of further increasing its presence by acquiring National Bank of Kenya (NBK) at $100 million (Sh13.2 billion). The banking landscape is currently dominated by tier 1 lenders such as KCB Group, Equity Group, and Co-operative Bank of Kenya, which command nearly half of the market’s share.

These banks not only have a strong presence but also substantial capital reserves, with Equity and KCB Groups boasting tier 1 capitals estimated at $1.44 billion (Sh190.1 billion) and $1.41 billion (Sh186.1 billion), respectively.  Their resilience and expansionary strides also present a significant hurdle for the newcomers. However, Atiti said Access Bank might face hurdles in Kenya due to cultural disparities and trust barriers. 

Conversely, Ogutu noted the potential advantages for the bank stemming from NBK’s extensive network of 85 branches nationwide, despite its recent challenges and loss of major accounts, including those from government entities.

Atiti underscored the positive impact of the new entrants, anticipating more competitive offerings for consumers, emphasising the necessity for Kenyan banks to enhance their services continually, embrace innovation, and deeply understand customer needs to preserve their dominance.