By South African lender FirstRand (FSR.J) is not under pressure to complete a bank acquisition in Kenya, Chief Executive Mary Vilakazi said, even as rival South African banks accelerate deal-making in East Africa’s largest economy.
Vilakazi told Business Day the group, which has maintained a representative office in Kenya rather than a full banking licence, has been searching for an acquisition opportunity in the country for several years but would not overpay to secure one.
“We have been looking for opportunities in Kenya, even in my previous role. However, there must be a willing seller at the right price for us to do any deal. What we will not do is overpay for any asset,” Vilakazi said.
Her comments come as South African banks compete for a foothold in Kenya’s banking sector, which has become a focal point of continental expansion plans as lenders look beyond a slow-growth domestic market.
Absa Group (ABGJ.J) has raised its stake in its Kenyan unit to about 72%, while Nedbank (NEDJ.J) this year agreed a deal worth 13.9 billion rand ($780 million) to acquire a majority stake in NCBA Group, a Kenyan lender with roughly 60 million customers across Kenya, Tanzania, Uganda and Rwanda.
Standard Bank (SBKJ.J), Africa’s largest lender by assets, has also expressed interest in NCBA as it seeks to expand its East African presence, according to earlier Business Day reporting. Standard Bank Chief Executive Sim Tshabalala has visited Kenya twice this year, meeting the central bank governor and the head of state, the newspaper reported.
FirstRand’s Africa operations currently span Botswana, Lesotho, Mozambique, Namibia, Zambia, Eswatini and Ghana, where it holds banking licences.
The group, valued at about 540 billion rand on the Johannesburg Stock Exchange, also maintains a representative office in Ghana and a corporate and investment banking presence in Nigeria.
Vilakazi said FirstRand’s African growth strategy had so far relied mainly on organic expansion supported by “medium-sized bolt-on acquisitions that bring customers, systems and scale,” rather than large-ticket deals.
She said the group’s retail arm, FNB, continued to expand its in-country franchises, particularly in deposit-gathering and transactional banking, while its corporate and investment banking unit, RMB, was scaling cross-border activities for clients operating across the continent.
The comments on Kenya came on the same day FirstRand reported annual results showing profit was squeezed by a provision linked to a British regulatory probe into motor finance commissions.
FirstRand said it had recognised an additional pretax provision of 518.4 million pounds ($700 million) for potential customer redress tied to the UK Financial Conduct Authority’s review of historical car finance commission arrangements, plus 29.4 million pounds in related costs.
The increase followed the FCA’s publication of its final redress framework in March, the bank said. The gross undiscounted provision, including an expected extension to the scheme’s start date, stood at 807 million pounds.
Headline earnings fell 5% to 39.7 billion rand for the year to end-June as a result of the charge, FirstRand said. Excluding the UK provision, normalised earnings rose 10%, with a return on equity of 21.5%.
“These outcomes reflect the strong topline growth, profitability and improved returns generated by the group’s two largest franchises,” Vilakazi said, adding that the additional provision had not been included in earlier guidance and had weighed on overall results.
Headline earnings per share from continuing operations rose 1% to 693.1 cents, while total headline earnings per share fell 5% to 712.9 cents. Return on equity remained within the group’s target range at 18.3%.
The board declared dividend growth of 16% to 280 cents per share, citing the group’s capital position.
FirstRand said legal challenges to the FCA’s redress scheme, announced in April, were likely to delay the start of the programme and any customer payments, with related court hearings expected between December and February. The bank said it had not factored the potential impact of those challenges into its provision.
“Significant estimation uncertainty remains, given the scale and complexity of the remediation process and ongoing legal developments,” the bank said, adding that a 5% change in the number of customers requiring redress would move the provision by 51.5 million pounds.
