Wednesday May 16 2012

KCB targets Uganda acquisitions

By Monitor Correspondent

The Kenya Commercial Bank (KCB) Group is considering buying out a bank in Uganda to shore up its market share.

East Africa’s biggest lender by assets disclosed the plan during a briefing with research analysts last week.

“Management also noted that KCB’s focus was to have at least 10 per cent share in all markets it operates in. To this end, management hinted on possible acquisitions, especially in Uganda,” said Standard Investment Bank in a note to investors.

Business Daily could not get comments from the KCB chief executive, Mr Martin Oduor-Otieno, as his phone went unanswered.

Investment analysts, who attended the briefing by KCB management, told Business Daily that the slow growth of the personal and mortgage loans in Uganda had limited KCB’s reach to corporate clients, a situation the lender is determined to change.

The bank has a 2 per cent market share in Uganda and 3 per cent in Tanzania, compared to 14 per cent in Kenya, 40 per cent in South Sudan and 7 per cent in Rwanda.

The acquisition is, however, seen as a lesser priority for the bank given that it has already broken even in Uganda.
The bank recently entered Burundi and is still eyeing other markets such as South Africa.

“Such a move would also impact on its cost-to-income ratio, which is not one of the best in the market,” said Vimal Parmar, an analyst with Kestrel Capital.

He said even though it may be a good strategy that shows the lender’s aggressiveness, it would prompt KCB to return to the market in search of additional capital since it was already involved in other investment ventures.

The bank entered Uganda in 2007 by setting up a new operation and it took it five years to break-even.

Equity Bank, on the other hand, acquired Uganda Microfinance Limited, which turned profitable last year.

Supporting subsidiaries

Capital injections. Last year, KCB injected Shs52.2 billion (Ksh1.8 billion) capital into its subsidiaries to support their growth. KCB Uganda received Shs29 billion (Ksh1 billion), KCB Rwanda was granted Shs17.4 billion (Ksh600 million) and KCB Tanzania received Shs5.8 billion (Ksh200 million).