SBM of Mauritius Eyes Kenyan Banks, Plans Nigerian Expansion

PORT LOIUS (Capital Markets in Africa) – SBM Holdings Ltd., Mauritius’s second-largest lender, plans more acquisitions in Kenya as it seeks to become one of the country’s top 10 banks within the next three years before expanding into West Africa.

The bank, which obtained a license to begin operating SBM Kenya Ltd. in May, expects to have its systems and staff in place by December, Advisor to the Board of Directors & Group Lead Executive Moses Harding said. It will then expand by establishing brokerage, micro-finance and asset management units as well as other services, he said.

“We can’t move to tier one in an organic way, so I will look at inorganic options,” Harding said in an interview Monday in the capital, Nairobi. “This is the right time to get close to if not the best value,” he said.

On a pro-rata basis, when its population is taken into account, Kenya has more banks than South Africa and Nigeria, the continent’s two largest economies. Consolidation in the industry is being spurred by a government-imposed cap on interest rates that’s squeezed the ability of smaller lenders to offer loans.

There have been seven acquisitions in the industry since 2015, according to Nairobi-based Cytonn Investments Management Ltd., and more purchases are expected after the central bank in March lifted a two-yearmoratorium on licensing new banks. Acquisitions of Kenyan banks are being done at cheaper valuations because of declining net interest income and growing non-performing loans, Cytonn said in its Sept. 18 report.

Regional Expansion
SBM, which is owned by the Mauritian government, is targeting growing profit by 30 percent this year to at least 3 billion rupees ($89.2 million) as it expands in the region, Chairman Kee Chong Li Kwong Wing said in April. It’s opened more branches in the Indian Ocean island nation of Madagascar and plans to grow its operations in Seychelles.

The bank’s shares have gained 20 percent so far this year, compared with a 23-percent advance for the benchmark SEMDEX Index.

In May, SBM acquired Nairobi-based Fidelity Commercial Bank Ltd. The Mauritian lender has also been shortlisted by the central bank, along with Paris-based Societe Generale SA, to bid for Chase Bank Kenya Ltd., Business Daily, a Nairobi-based newspaper, reported in June.

SBM had targeted Chase to acquire a license in Kenya, but that objective has now been achieved with the purchase of Fidelity, Harding said. The bank no longer sees value in buying Chase “lock, stock and barrel,” he said.

“We will be looking at portfolio acquisitions both on the asset sides and the liability sides,” he said. “There’s a lot on the table, I just need to pick and choose.”

SBM Holdings plans to double its 147 billion rupees of assets in the next three years by entering into more markets in East Africa and venturing into the West African markets of Nigeria and Ghana from 2020.

“Nigeria will emerge bigger than South Africa in the next 20 to 24 years,” Harding said. “We will create a hub with either Nigeria or Ghana as the hub into West Africa.”

Source: Capital Markets in Africa