Bank consolidation gathers steam as DTB sets out to acquire Habib

The banking sector continues to undergo realignment with mergers becoming a common theme.

Diamond Trust Bank (DTB) has become the latest lender to cast its eyes on its smaller rivals.

The bank on Tuesday, announced its intentions to acquire Habib Bank, in a deal set to be concluded by July.

The shift seems to align with a position held by the National Treasury and the Central Bank of Kenya (CBK) of the need for the banking industry to consolidate and become more competitive.

DTB has 6.1 percent of the market, making one of the big players by CBK standards.

In a statement to newsrooms the central bank said the deal was still subject to regulatory approval both in Kenya and Pakistan, where Habib Bank’s parent company is based.

“The Central Bank of Kenya announces that it has been advised by both Diamond Trust Bank of Kenya Limited and Habib Bank Limited of DTBKL’s intention to acquire HBL,” the regulator said in a statement.

The banking regulator said it would give more details of the transaction as it progresses.

Besides Kenya, DTB has operations in Tanzania, Uganda and Burundi and is ranked 6th out of the 41 banks in the country.

Through a series of tweets on its official handle, DTB indicated that its 2016 pretax profit grew by 26 percent to close at Sh8.9 billion.

The loan book grew to Sh137 billion in 2016 while deposits grew by 34 percent to Sh170 billion

Habib Bank on the other handed is ranked 33^rd with six branches spread across the country.

With 41 banks serving a population of 44 million people, it has been held that the country may be over banked.

The move by DTB marks a spate of both planned and completed acquisitions in the market.

I&M Holdings recently completed the acquisition of Giro Bank while Mauritius based SBM Holdings is in the process of acquiring Fidelity Bank.

Mwalimu Sacco in 2015 acquired Equatorial Bank and re branded it to Spire Bank while West African lender GT Bank entered the market back in 2013 after acquiring Fina Bank.

The consolidation is seen to be gaining traction with small banks finding it hard to meet the CBK’s capitalization requirements.

Banks are expected to shore up their core capital to Sh5 billion from the current Sh1 billion by 2018.

The central bank has in the past held that the sector lacks diversity, accusing banks of offering similar products.

This has seen the regulator call on banks to present their business plans in a move expected to jolt competitiveness.