Kenya’s DTB to digest Habib Bank deal before further M&A

NAIROBI: Kenya´s Diamond Trust Bank (DTB) will focus on integrating Habib Bank Kenya and will only start looking to make further acquisitions from next year onwards, its chief executive told Reuters on Wednesday.

DTB said on Tuesday it would buy Habib Kenya, which has six branches in the country, with DTB shares worth 1.8 billion shillings ($17.5 million). The deal is expected to be concluded in July, subject to shareholder and regulatory approvals.

DTB chiefexecutive Nasim Devji said that the deal will give the bank access to some of the most promising frontier markets in Asia, through Habib Kenya'´s correspondent banking relations with Habib International´s network.

Pakistan-based Habib Bank Limited, the parent of Habib Kenya, operates in 22 countries. The acquisition is the latest in a period of consolidation sparked by the closure of three banks since 2015, a government cap on interest rates last September and a surge in bad debts.

"We need this year to ensure we are well assimilated, the two banks come together seamlessly. Then maybe 2018, 2019 we will look at other options," Devji added. Francis Mwangi, a bank analyst at Nairobi-based Standard Investment Bank, said that the rate cap is forcing smaller banks to look for, or accept suitors in order to survive.

"Those banks come under pressure in terms of operations." DTB, which also has outlets in Uganda and Tanzania, is expected to increase its market share through the deal. Analysts said DTB´s shares were trading at a discount of 30 percent to the rest of the industry. 

DTB said on Tuesday its pre-tax-profit rose 14.8 percent to 10.99 billion shillings, surprising analysts who were expecting the rate cap, which also set a minimum deposit interest rate, to hurt its earnings.

"From the numbers we have seen so far, that has not been the case. To us it is an opportunity to start looking at the tier 2 banks," said Mwangi of Standard Investment Bank.