The coronavirus pandemic has seemingly stalled various mergers and acquisitions in the financial sector that were to take place this year.
In March, Co-operative Bank had set sights on fully acquiring Jamii Bora Bank with the lender’s board giving a nod for discussion that would lead to the acquisition, this is yet to solidify.
According to a report by NewYork based venture capital company, Pitchbook, private equity and venture capital deals will slow down, as global economy stalls amid coronavirus pandemic.
Equity Bank had also been on an acquisition spree, although most of it has been of foreign banks.
In April last year, Equity announced it would acquire Atlas Mara stakes in banks in Rwanda, Zambia, Mozambique and Tanzania.
Later on in September, Equity announced it was in talks with some of Banqué Commerciale du Congo’s shareholders to buy a controlling stake for cash.
All the above mergers and acquisitions are yet to take place with the uncertainty in the economy.
The Central Bank of Kenya, has been pushing for natural consolidation, noting that mergers and acquisitions are beneficial in any economy.
In October last year, CBK governor Patrick Njoroge had predicted the country will witness more mergers and acquisitions in the banking sector .
In the last Financial Sector Stability report, the apex bank noted that mergers bore more fruit in terms of profit for the merged entity.
“Despite the decline in profitability in 2014 – 2018, banks that merged are more profitable than those that consolidated through acquisition,” the report said.
In 2019, there were numerous mergers and acquisitions in the financial sector, with KCB Group acquiring National, NIC and CBA mergers to form NCBA Bank and Transnational Bank takeover by Access Bank PLC.
Whereas merges and acquisitions are strategies bank managers adopt to increase profitability, the regulatory perspective is that it enhances stability of the resultant entity and the entire banking sector.
The CBK latest weekly bulletin also noted that global financial markets have also remained volatile ,reflecting the growing concerns by investors about the intensity and duration of the coronavirus-induced global economic shock.
Kenya recorded a sum total of 41 mergers between 1990 and 2018 with a majority 28 unions taking place in the 90’s.