FirstRand Bank of South Africa announced it is looking to acquire a mid-sized Kenyan bank.

The pursuit follows a previous failed attempt to close a deal at a satisfactory price and comes as foreign banks target Kenya’s profitable financial services market, where industry profits rose 16.3 per cent last year to KSh241.65 billion.

FirstRand opened a representative office in Kenya in 2012 to source infrastructure and project-financing work and now wants a local lender to deliver its full suite of services, including retail banking, while also considering non-bank assets such as an insurance firm or investment bank.

Chief executive Mary Vilakazi said the group is seeking growth through the buyout of a small lender, backed by organic growth rather than buying a top-tier player, and added that a willing seller at the right price is required and the bank will not overpay.

The bank told Business Daily Africa it is interested in establishing a larger presence in Kenya, cannot comment on specifics, and has indicated it is considering acquiring banks.

FirstRand, the second-largest South African bank by market value, operates Rand Merchant Bank in Nigeria, sold its Tanzania business in 2022 to Exim Bank of Tanzania after starting operations in 2011, and plans to reinvest proceeds from the sale of its UK business, MotoNovo, to strengthen its African footprint.

Earnings for the year to June fell five per cent to R39.7 billion (KSh309.4 billion).

Standard Investment Bank analyst Melodie Ndanu said stricter Central Bank of Kenya capital rules for smaller banks may give FirstRand negotiating power and that a slowing South African market and the need to diversify revenue streams are driving the acquisition push.

Kenya’s banking sector is poised for consolidation as the Central Bank of Kenya will raise the minimum core capital requirement for commercial banks from KSh1 billion in 2024 to KSh10 billion by 2032.

Recent activity includes Nedbank’s 66 per cent purchase of NCBA Bank for KSh110 billion, Absa Group’s attempt to lift its Kenyan stake to 85 per cent after a failed share-buy offer, Standard Bank’s continued search for deeper presence, Access Bank’s acquisition of National Bank of Kenya, and Zenith Bank’s agreement to acquire Paramount Bank.

Analysts note Kenya’s role as a gateway to the East African Community, which is expanding at least five per cent annually, and cite the country’s solid regulation, easy dividend repatriation and freely traded shilling as attractions for South and West African banks seeking entry to the wider East African market.

The Democratic Republic of Congo has also been a target for Kenyan banks expanding regionally.