👨🏿‍🚀TechCabal Daily – Safaricom cleans house

FirstRand has spent about 14 years window-shopping Kenya’s banking sector. The South African banking group may finally be ready to buy.

What happened? FirstRand, the parent company of First National Bank (FNB) and Rand Merchant Bank (RMB), has stepped up its search for a Kenyan lender. Mary Vilakazi, the bank’s chief executive officer, said the group would rather buy a smaller bank at the right price and grow it than pay a premium for one of Kenya’s biggest lenders.

No target has been named. FirstRand is also looking beyond banking at businesses such as insurance and investment banking as it tries to build a broader East African operation.

Explain like I’m new here: FirstRand is not new to Kenya. In 2012, it opened a representative office in Nairobi, mainly through RMB, to arrange infrastructure and project-finance deals. But a representative office cannot take deposits or run a full retail bank.

Even then, FirstRand said it wanted to buy a mid-sized Kenyan lender. It never did. High valuations made acquisitions difficult, so the group spent years operating on the market’s edges instead.

Between the lines: Kenyan banks made KES 241.65 billion ($1.9 billion) in combined profits last year, up 16.3%. At the same time, smaller lenders are under pressure to build enough capital to meet a KES 10 billion ($77 million) minimum by 2032, which could create more willing sellers.

FirstRand therefore does not need to win a bidding war for a trophy bank. Buying a smaller lender would give it a banking licence, deposits, and customers, then let it add FNB’s retail products and RMB’s corporate business over time.

Zoom out: South Africa’s banks are crowding into Kenya. Nedbank has completed its 66% acquisition of NCBA, while Standard Bank already operates Stanbic and is looking for more scale.

FirstRand has watched Kenya for more than a decade. The interesting part now is whether rising consolidation finally produces a bank at a price it is willing to pay.