South Africa’s Absa Bank is exploring plans to buy another Kenyan lender in a move that would help it grow its share of the retail banking market.
The bank is actively looking at several acquisition options to expand its lending capacity, targeting households and small businesses, in the race to reclaim its former top position.
“We are always on the lookout for opportunity be they organic or inorganic, but the regulatory environment must be conducive and positive for that. Fortunately, Kenya and many of the countries in East Africa have a very conducive environment for us to be looking at inorganic growth,” Kenny Fihla, the Absa Group CEO, told the Business Daily in an interview during his ongoing Kenya visit.
“We have not yet come across anything, but we continue to look, we continue to explore and at the right time we will do what is necessary to ensure that our business grows.”
Absa joins a growing list of South African banks, including Nedbank, Standard Bank, and FirstRand Bank, trying to find new avenues to grow and diversify their regional footprint via buyouts.
If Absa closes a transaction, it will be the latest in Kenya’s banking sector where a tenfold increase in the minimum core capital requirements for commercial banks to Sh10 billion is expected to trigger deals and tie-ups.
Absa Group will seek to close the deal through its Kenyan subsidiary, where it has a 68.5 percent stake.
The move is part of an effort by the bank to diversify its income further under a fresh strategy that is marked with increased pursuit of the retail market, which Absa has been slow on since 2016.
Absa’s renewed push for the retail market started in 2024, when it increased its branches for the first time since 2016.
It It added two branches to 121 outlets in 2016. But the bank soon after began a cutback that saw the outlets reduced to 91 in 2017 and 83 in 2023. In 2022, it added three branches to 86.
In recent years, commercial banks in Kenya have increased their use of mobile and internet technologies to increase efficiency and reduce the costs of running a branch network.
Mr Fihla said Absa sees opportunities for growth in Kenya’s and East Africa’s retail market, and that the lender will be looking to widen its scale on that front.
“Ultimately, we want to be a scale player because banking is about scale. If you are too niched, your relevance to the economy and your ability to make a big impact tend to be limited and so we would want to grow on scale,” he said.
“We understand that we cannot get there overnight and have to be selective around which client segments we want to play in and then create scale within a defined area before using that platform to move to the next set of opportunities.”
Absa’s previous cutback in the retail space coincided with rivals—Equity, Cooperative and KCB—increasingly targeting the market.
This saw Absa lose its position as Kenya’s largest lender by assets to the three rival banks and the NCBA Group.
In 2007, Absa was Kenya’s largest bank with Sh157.9 billion assets ahead of KCB, with Sh112 billion, according to the Central Bank of Kenya (CBK).
The tables turned, and in 2024, Absa had been relegated to the fifth position with assets of Sh606 billion against KCB’s Sh1.27 trillion, Equity’s Sh1.02 trillion, Cooperative Bank’s Sh687.8 billion and NCBA’s Sh588.7 billion.
Absa’s strategy of widening its footprint in the retail market is hinged on gathering cheap deposits from households and small businesses.
The cheap deposits could ultimately be deployed into areas that could generate higher returns, such as corporate lending.
“The retail market is very attractive to Absa Bank for several reasons. First, it helps us to gather liabilities or liquidity that is required for us to lend to clients,” said Mr Fihla.
“That liquidity is viewed favourably by regulators and consequently makes it easier for us to lend cheaply. That is the reason why everyone would want to access that segment of the client base.
“Secondly, you cannot call yourself an African bank if you are not relevant to the people who live in Africa and make sure that people have access to the financial system.”
Mr Fihla is on a three-day tour of Kenya that started on February 3.
His visit came just a week after Standard Bank’s Sim Tshabalala visited the country, underlining South African banks’ interest in Kenya and East Africa.
Standard Bank lost the race to acquire NCBA Group after its South Africa rival, Nedbank Group, agreed a deal to buy the Kenyan bank in a cash-and-stock transaction as part of the lender’s ambitions to expand in East Africa.
Nedbank, like most South African and Nigerian lenders, views East Africa as strategically important, citing strong macroeconomic fundamentals, a large and growing population and the region’s role as a trade corridor linking Africa with the Middle East, India and Asia.
Nigeria’s second-largest bank by asset base and market capitalisation, Zenith Bank, has also inked an agreement to acquire Kenya’s Paramount Bank.
