[Kenya] Diamond Trust Bank to acquire Habib Bank

Mid-tier Diamond Trust Bank plans to acquire small-sized Habib Bank subject to regulatory approvals underlining rising consolidation in the industry.

The Central Bank of Kenya yesterday announced the transaction is expected to be completed by July 2017. The transaction is subject to regulatory approvals in Kenya and Pakistan.

“CBK will provide further updates as the transaction is progressed,” the regulator said in a statement.

DTB, a tier two lender, began operations in Kenya in 1946 and has extended its footprint to Tanzania, Uganda and Burundi. On the other hand, Pakistan-headquartered Habib Bank has been operating in Kenya since 1956.

If approved, this will be the third successful acquisition in the banking sector in less than a year.

The deals that have been successful include the acquisition of a 51 per cent stake in Oriental Commercial Bank by Bank M of Tanzania in June 2016 and the take over of Giro Commercial Bank by I&M bank last month.

There is also a plan by the Mauritian SBM Holdings to acquire Fidelity Commercial Bank while CBK is in talks with an investor to buy Chase Bank and get it out of receivership before end month.

The CBK took over Chase Bank in April after a run on its deposits raised fears it would be unable to repay customers.

Chase ended a nine-month wave of shut downs which started with the closure of Dubai Bank and Imperial Bank in August and October 2015, respectively.

Central Bank says mergers and acquisitions is the sure way to consolidate the banking sector amid concerns that most local banks are under capitalised and cannot compete, especially with the highly capitalised foreign banks which are making inroads in the local financial sector.

Kenya has one of the highest ratio of banks relative to population in the world. There are 41 banks including a mortgage financier serving about 44 million people, putting the ratio at 0.93 or simply one bank for every 1.07 million people.

The number is set to rise to 43 after CBK complete the licensing of two banks, which is seen a the first step to lifting the November 2015 indefinite suspension on issuing new licences.

The regulator said it will be issuing permits to DIB Bank Kenya, which is owned by Dubai Islamic Bank, and Mayfair Bank which is owned by Kenyan investors.

According to the CBK, the two firms had received an “approval in principle” before the indefinite suspension of new banks.

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