Nedbank Group Ltd., the South African lender being spun off from parent Old Mutual Plc, said it’s in talks that may lead to the acquisition of a Kenyan bank as it seeks to benefit from an economic growth rate that’s double the average for the rest of the continent.
“Within the next 12 months we’ll certainly be looking to do a deal,” Mfundo Nkuhlu, chief operating officer of Johannesburg-based Nedbank, said in an interview at the World Economic Forum on Africa in Kigali, Rwanda.
“Some of the wobbling that the Kenyan banking sector has gone through points to the fact that there will be some clean up and perhaps the clean up leads to consolidation. Which, if you’re sitting on the outside, presents an opportunity.”
Kenyan regulators have been forced to put three banks into receivership since August, when Dubai Bank Kenya Ltd. breached daily cash-reserve-ratio requirements. Two months later, Imperial Bank Ltd. was closed down amid claims of fraud that company executives deny. In April, Chase Bank Kenya Ltd. was shut down after a run on deposits.
The $61 billion economy is seen as overbanked, with 42 banks serving 44 million people, compared with 22 banks in Nigeria, which has a population of 180 million and gross domestic product that is nine times bigger. Still, the country’s largest banks are stable and the International Monetary
Fund expects Kenya’s gross domestic product to expand by 6 percent this year, compared with 3 percent for sub-Saharan Africa as a whole and South Africa’s forecast of 0.6 percent growth.
“Ultimately we want to be a significant player” in Kenya, Nkuhlu said. “East Africa is quite interesting because the dynamics are slightly different, less dependent on the single commodity exports, more diversified trading base and as a result it has sustained relatively higher momentum levels. What has been the issue up to now is that the price: earnings multiples of banks have generally been expensive.”
Nedbank’s parent, London-based insurer Old Mutual, is splitting its business into four units and has so far said it may issue the lender’s securities to Old Mutual shareholders. The insurer plans to complete the break up of its business by 2018. This may include the sale of stock in its U.S.-based asset management unit, the listing of its wealth operations in London and the consolidation of its emerging-markets unit into a single traded entity in Johannesburg.