Wave of Mergers & Acquisitions strengthens banks’ credit profiles across sub-Saharan Africa, Moody's
The wave of mergers and acquisitions among banks in sub-Saharan Africa is credit positive for bank creditors and is set to continue, Moody's Investors Service said in a report published today.
"The number of small banks is declining, while the largest are growing steadily, producing banks with stronger credit profiles," said Akin Majekodunmi, VP-Sr Credit Officer at Moody's. "We expect this trend to continue as regulators push for banking system consolidation, and subdued economic growth across much of the region causes banks to seek growth through mergers and acquisitions."
Consolidation activity is likely to be greatest in East Africa, and Kenya and Tanzania in particular, where there are many small banks.
In Angola, Moody's expects an asset quality review by the regulator will lead to some consolidation over the next two years. In the rest of southern, west and central Africa Moody's expects limited activity over next two years.
Consolidation is increasing economies of scale and improving income stability due to geographical and product diversification.
It is also reducing the number of very small, weak banks, making the aggregate credit profiles of African banking systems more resilient to the challenges in the operating environment.