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AFRICAN BANKER'S WORLD NEWS.

MOODY'S SAYS MORE M&AS DUE IN KENYA, TANZANIA

Global ratings agency Moody's has predicted more mergers and acquisitions in the Kenyan market within the next two years as capital-raising options diminish for smaller, struggling lenders.

The African banking sector report singles out Kenya and Tanzania as markets where mergers and acquisition should

be prevalent, given their fragmented banking make- up that boasts a few large banks and many smaller ones.

In Kenya and Tanzania, the top five banks account for 46% and 55% of the sector's assets respectively.

Regulatory changes, such as the interest rate cap in Kenya and stricter capital requirements, are also putting smaller lenders under pressure and inviting takeovers by large peers.

In Kenya, a number of smaller banks have been taken over by larger rivals in recent years.

Kenyan Commercial Bank (KCB) is in the process of taking over National Bank of Kenya (NBK) in a deal that is seen as essential in saving state-owned NBK from collapse over its weak books.

KCB is the largest lender by assets in the region, with a healthy balance sheet that allows it to finance the takeover without raising additional capital. The bank is also taking over part of the assets of the collapsed Imperial Bank.

Other banking takeovers in Kenya include DTB's acquisition of Habib Bank in 2017 and I&M Bank's buyout of Giro.

Commercial Bank of Africa and NIC Bank are also in the process of concluding a merger, which is expected to create the country's third largest bank by assets.

KENYA'S EQUITY TO BUY ATLAS MARA BANKS

Kenya'a Equity Bank has entered into a preliminary agreement to buy out banking units in Zambia, Mozambique, Tanzania and Rwanda from Atlas Mara (ATMA), with a value estimated at $105.71m.

The proposed share swap deal reaffirms Equity's ambitious pan-African strategy, which will begin with East African expansion.

Group chief executive James Mwangi said the advanced talks will see Equity buy out ATMA- owned African Banking Corporation's (ABC) operations in Tanzania, Zambia and Mozambique as well as a majority stake in Banque Populaire du Rwanda (BPR).

The binding deal is subject to ironing out final details with ATMA as well as obtaining various approvals, including those from regulators and shareholders.

Mwangi said ATMA will, on successful completion of the agreement, be allotted a 6.27 per cent stake, in Equity in a share swap whose value has been put at Ksh10.7bn ($105.71m).

NIGERIA FORCES LENDING BY CAPPING CENTRAL BANK DEPOSITS

In a bid to revive Nigeria's spluttering economy, the Central Bank of Nigeria (CBN) plans to cap banks' interest-bearing deposits in order to boost lending.

The central bank said that daily placements by lenders above $6.5m would not earn interest.

The latest rule is the second attempt to increase credit lines to businesses and consumers by forcing banks to lend after the recent recession.

Nigeria's slight recovery from contraction has not been accompanied by credit growth as banks prefer to invest in risk-free government securities.

"This directive is unlikely to force Nigerian banks to grow their lending aggressively," Peter Mushangwe, banking analyst at Moody's, told Reuters.

"In our view, the additional liquidity will likely move to the interbank market rather than lending."

IMF URGES MOROCCO TO FLOAT DIRHAM

The International Monetary Fund (IMF) reiterated its call on Morocco to move towards greater exchange rate flexibility in order to strengthen the economy's resilience to external shocks and boost competitiveness.

In January 2018, Morocco widened the band in which the dirham trades against hard currencies to 2.5% either side of a reference price from the previous 0.3%.

"The initial phase of the transition to further exchange rate flexibility has been successful, and current conditions remain favourable for a continuation of this reform for preventive purposes, as it will help the economy absorb potential external shocks and preserve its external competitiveness," said the IMF in a country report on economic and financial developments.

Authorities told the IMF the next phase in the dirham float will be launched when economic conditions permit.

The IMF expects growth to slow to 2.7% in 2019 from 3% in 2018 before picking up to 3.4% in 2020 as the economy continues to be affected by agricultural output and triggered by domestic demand.

The central bank has not intervened in the foreign exchange market since March 2018.

CDC INJECTS $200M INTO BMCE BANK OF AFRICA

The UK's development finance institution CDC Group will acquire an equity stake of 5% in Morocco's BMCE Bank of Africa through a primary capital injection of $200m, according to a joint press release.

"The ultimate goal of our agreement goes beyond the $200m investment," said Othman Benjelloun, Chairman and CEO of BMCE Bank of Africa.

"Rather, it is an alliance aimed at developing Morocco and Africa and ensuring that Africa's human capital achieves a sense of fulfilment."

"Investing in financial institutions is a powerful mechanism through which we can deliver impact at scale," said Nick O'Donohoe, CEO of CDC Group.

"The capital markets in countries such as Morocco are integrated across Africa and are critical to the success of more economically challenging environments in the region. We see these countries as regional hubs, strong platforms from which to provide affordable finance, goods, and services to millions of people," he added.

"Our support will allow the Bank to grow its offering, especially in the SME segment, deepen penetration of banking services and promote financial inclusion for all."

Present in 31 countries throughout Africa, Europe, Asia, and North America, BMCE Bank of Africa is today the most internationally oriented Moroccan banking group.

The bank employs more than 15,200 people around the world, with more than 1,675 branches serving nearly 6.6m customers.

AFDB APPROVES FINANCING FOR AFRICAN ENERGY PROVIDERS

The Board of Directors of the African Development Bank (AfDB) has approved an innovative multinational financing programmer for energy companies which will provide electricity access for 900,000 households or 4.5m people across sub-Saharan Africa by 2025.

The programme will also facilitate local currency financing for the companies and provide local lenders with risk mitigation instruments to support them.

Elaborating on the programme, Wale Shonibare, the Bank's Acting Vice-President for Power, Energy, Climate Change, and Green Growth, said the bank will provide critical technical guidance and credit enhancement to energy providers and local financial intermediaries.

The programme will contribute to the installation of an estimated 45MW of clean energy.

AFREXIMBANK INCLUDED IN SEM-10 INDEX IN MAURITIUS

The Stock Exchange of Mauritius (SEM) has announced the inclusion of Afreximbank, the pan-African multilateral trade institution, in its SEM-10 index.

The other constituents companies are: MCB Group, SBM Holdings, Grit Real Estate Income Group, ENL, CIEL, New Mauritius Hotels, Rogers & Company, and Lux Island Resorts.

The index tracks the performance of the 10 largest stocks on the SEM in terms of market capitalisation and the most liquid stocks in terms of average value traded and trading frequency during the preceding three months.

The index will enhance Afreximbank's visibility with local and international investors and, potentially, encourage institutional investors to include the bank's Depositary Receipts in their investment portfolios.

Ninety per cent of foreign investors' transactions on SEM-listed stocks are targeted towards companies included in the SEM-10 index.

Some of the larger companies in the index are tracked closely by global data vendors like Bloomberg and Factset, and by global index providers like S&P and MSCI.

Afreximbank has the third best-performing stock in 2019, and inclusion in the index is set to boost its profile and spur business.

SARB MAY SELL STAKE IN AFRICAN BANK

The South Africa Reserve Bank (SARB) may sell its stake of African Bank in the next two years depending on the bank's upcoming performance.

The Reserve Bank owns 50% of African Bank, the Public Investment Corporation (PIC) owns 25% and a consortium of private banks owns the remaining 2%.

Bank regulator, Prudential Authority's Kuben Naidoo, said: "African Bank is in year four of at least a five-year turnaround, and is operating successfully. At some point we do intend to dispose of our stake... We want to ensure the bank is sound and stable first. Probably, in the next year or two the Reserve Bank will look to dispose of its stake."

African Bank was placed into curatorship in 2014, after it collapsed under the weight of bad debts. As part of the curatorship process the Reserve Bank, the PIC and a number of private banks took up a stake and recapitalised the 'good' bank, while the worst of its loans were hived off into an entity known as Residual Debt Services. The 'new' African Bank was launched in 2016.

In the last year, South Africa has seen the launch or announcement of several new banks, which are expected to heighten competition in the sector.

Asked whether there will be sufficient market appetite to purchase African Bank, Naidoo said: "We will assess market conditions and if favourable, we will seek to sell but if not, we can delay that.

BANKING FRAUD RISES IN SOUTH AFRICA

Combined gross fraud losses on South African bank cards soared by 18% in 2018 compared to the previous year and totalled around $60m, the industry body, Sabric, revealed in its annual crime statistics report for 2018.

Credit card fraud increased by 18.4%, while debit card fraud rose by 17.5%.

"We are concerned about some of the increases, which clearly reflect that criminals will take every opportunity to get their hands on bank customers' money," said Sabric CEO Kalyani Pillay in a statement.

'Card not present' fraud (CNP) on South African issued credit cards remained the leading contributor to gross fraud losses, accounting for 79.5% of the total.

"We have seen a sharp increase in 'vishing' incidents, where criminals phone bank customers, lead them to believe that they are speaking to the bank or a legitimate service provider, and use social engineering tactics to manipulate them into disclosing their confidential bank card details, as well as other personal information.

"A bank will never call you to ask for this information. If you receive such a call, put the phone down immediately," warned Pillay.

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Publication:African Banker
Geographic Code:60SUB
Date:Aug 5, 2019
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