The East African banking sector continues to strengthen on the back of robust economic growth in almost all markets and is now beginning to reflect the size of the region’s population. The number of East African companies in our Top 100 Banks has jumped from 14 last year to 18 in this year’s table.
Last year’s 20th biggest East African bank was Bank of Kigali, with $54m but CfC Stanbic Bank needed more than twice that figure, $119m, to secure the same position this year.
Mauritius now boasts seven banks in the regional Top 25, while Kenya has 11, indicating that it is retaining its position as one of the most competitive business and retail banking markets on the African continent.
Ethiopia and Uganda have just one entrant apiece, leaving Tanzania with two and Sudan three. Given the size of the populations of Ethiopia, Uganda, Sudan and Tanzania, it is remarkable that Mauritius carries such weight, both at the top of the table and in terms of the sheer number of banks represented in our table.
Mauritius Commercial Bank (MCB) remains the biggest bank in East Africa by some distance, with tier-one capital valued at $765m. However, Kenya Commercial Bank has overtaken Commercial Bank of Ethiopia to take second position, as the result of a fall in the Ethiopian company’s value.
However, MCB announced a 9.4% fall in nine-month pre-tax profits to the end of March to R3.66bn ($124.8m). The company blamed “a rise in the allowance for credit impairment” for the fall but forecast growth in its overseas operations for next year.
MCB chief executive Pierre Guy said: “Two-thirds of our balance sheet is from local activity. The big international banks are primarily here for the offshore sector. Balance sheets here are strong. We never got into the rat race of chasing business. We stuck to basic banking principles and margins are good.”
The company holds a 45% share of the domestic market, ahead of State Bank of Mauritius with 25%, with the remainder held by 18 different banks.
According to recent figures from India’s ministry of commerce, 42% of all of India’s foreign direct investment, or $55bn, over the period 2000–11 was invested in Mauritius. However, the country has been forced to defend itself from accusations that it has been used by Indian companies in ‘round tripping’. The term refers to the practice of taking money out of India to avoid tax before returning it to the same country by another route.
Rundheersing Bheenick, the governor of the Central Bank of Mauritius, said: “We were not very well equipped to protect our jurisdiction’s image vis-à-vis attacks in the press. All it takes is for one high-profile Indian investor to have a tax case and it hits the headlines once again.” Further regulation in India and Mauritius may be required to tackle the problem.
High rates hit lending
Kenya, Tanzania and Uganda were all affected by rising inflation and weakening currencies last year. However, increased interest rates have now brought the situation under control, with inflation falling as low as 6% in Kenya in August, down from 19.8% last November.
However, this success has not been without cost. The Central Bank of Kenya increased its key lending rate to 18%, with commercial lenders offering rates of 25-27%. The number of non-performing loans spiked, while economic growth has been depressed.
However, rates have fallen in recent months, as the central bank seeks to counter fears over lower growth. On 1 October, the KCB reduced its base lending rate from 22% to 19%, with its mortgage base rate falling to 18%.
The chief executive for the KCB Group, Martin Oduor-Otieno, said: “We exist to support and grow Kenyan enterprises and households through the extension of affordable credit. The cost of credit is improving and monetary policy indicators all point towards a stable economic environment. We view these developments as encouraging economic indicators which we firmly believe should translate into benefits for our clients.”