Regional outlook

Banks lead sustained economic growth in Kenya - report

In Summary

•The big national brands are competing for dominance within the local banking sector.

• The Kenyan banking sector is leading the region, with its most successful banks being regional leaders.

A general view shows the Equity Bank headquarters in the Upper Hill district of Kenya's capital Nairobi, March 8, 2016. /REUTERS
A general view shows the Equity Bank headquarters in the Upper Hill district of Kenya's capital Nairobi, March 8, 2016. /REUTERS

The planned bank mergers going on in the country are pointers to the growing influence of the sector in the nation’s ongoing economic diversification, a report says.

The report, commissioned by ICAEW and produced by partner and forecaster Oxford Economics, has underscored the role of the banking sector in supporting the GDP growth of Kenya’s economy through diversification.

It says the Kenyan banking sector is leading the region, with its most successful banks being regional leaders.

The growth of this sector has also facilitated the merger of big national brands as they compete for dominance within the local banking sector.

The planned merger between Kenya’s biggest lender by assets, Kenya Commercial Bank Group, and the National Bank of Kenya (NBK), the planned NIC Bank and Commercial Bank of Africa merger, indicate the growing influence that the banking sector in Kenya has on the country’s ongoing economic diversification.

“East African economies have minimal fears of contagion from lower commodity prices…,” said Michael Armstrong, ICAEW’s regional director for Middle East, Africa and South Asia, adding that the diversified economies in this region are best placed to weather a storm caused by instability in oil prices.

Some impressive developments towards mergers of the lenders including an agreement that employees of Commercial Bank of Africa and NIC Bank should not lose their jobs for a period of 12 months after the deal is sealed.

Regulator Central Bank of Kenya has also declared its support for National Bank of Kenya takeover by KCB Group, saying the current NBK management is weak and unable to inspire confidence to attract new capital injection.