Access Bank Kenya and Consolidated Bank of Kenya have the biggest task of raising additional funds to meet new capital requirements for lenders over the next few years.
The two lenders are starting from a negative position given they are lagging behind the current minimum capital requirement of Sh1 billion.
Amendments to the Banking Act last December required banks to raise their core capital to Sh10 billion over the next five years from Sh1 billion.
The gradual increment starts with an increase to Sh3 billion by the end of 2025, Sh5 billion by 2026, Sh6 billion by 2027, Sh8 billion by 2028 and eventually Sh10 billion by 2029.
Consolidated Bank will have to raise Sh4 billion in the next seven months to comply with the new core capital requirement of Sh3 billion at the end of 2025 as years of accumulated losses have wiped its core capital to negative Sh731 million.
The bank had accumulated losses of Sh4.45 billion as of December 2024, underlining its struggles.
The government-owned lender plans to conduct a rights issue to meet the higher capital threshold.
Core capital is money from shareholders or retained earnings, which is meant to help a lender absorb potential losses.
Nigerian-owned Access Bank will be looking at its deep-pocketed parent company to raise almost Sh3 billion by the end of the year to be compliant. Access Bank had a core capital of Sh152 million as of the end of December 2024.
The parent company has also declared interest in acquiring the National Bank of Kenya (NBK) from KCB Group in its push to have a strong footing in the East African market following the acquisition of Transnational Bank in a Sh1.4 billion transaction five years ago.
It rebranded Transnational to Access Bank Kenya, which is expected to merge with NBK once the buyout of the latter is completed.
The multinational had expressed interest in Sidian Bank in 2022 before backing out and going for NBK.
This indicates the Nigerian bank will be investing heavily in the country to make the local operation compliant and for the completion of the acquisition of NBK.
Access Bank Kenya reported a loss of Sh1.2 billion for the year ended December 2024, which ate up its core capital to leave it non-compliant.
Consolidated Bank will be hoping that a cash-strapped Treasury will be willing to open its purse in a cash call.
Promises by the Treasury to support the lender have for years not materialised resulting in the lender straining to stay afloat and auditors raising doubt of the bank’s ability to continue as a going concern.
Other lenders whose core capital is below Sh3 billion include UBA Kenya, Middle East Bank, Development Bank, Paramount, M-Oriental, Commercial International Bank and Premier Bank as of December 2024.
In addition to capital injection from the owners, banks also have an option of retaining profits, merging or participating in acquisitions to create large, better-capitalised lenders.
The profitable ones whose core capital is close to the mark of Sh3 billion are likely to rely on retained earnings to be compliant.
