Zenith Bank Plc of Nigeria, which is already present in several African countries and the United Kingdom, has decided to foray into the Kenyan banking sector after getting the green light from the local regulator to acquire Paramount Bank Limited.
The Competition Authority of Kenya (CAK) welcomed the deal with the condition that all Paramount Bank employees be given a job in the new set, up for at least 12 months after the deal is signed. Paramount Bank employs 78 people at the moment.
According to the deal, Zenith Bank will become the sole shareholder of Paramount Bank and will make Kenya the eighth market for the Nigerian bank.
In its decision, the CAK stated that the acquisition is not likely to harm competition in the banking sector of Kenya as the new organization will still be competing with several big local and international banks.
According to Zenith Bank, the acquisition will help to shore up Paramount Bank’s finances and put the bank in a position to meet the capital requirements expected under the regulations that have become more stringent for banks in the region.
This transaction is a signal to the world that Kenya is an increasingly attractive regional financial hub for African banks looking to expand their operations.
The announcement of the Zenith -Paramount deal came only a day after South Africa’s Nedbank Group disclosed that it was acquiring a controlling stake in NCBA Group Plc, a transaction valued at about Sh110 billion.
Combined, these two pieces of news indicate the growing eagerness of foreign investors to tap into Kenya’s banking sector, a move that is being attracted by Kenya’s status as the largest economy and financial hub in East Africa, as well as the regulatory, driven consolidation taking place in the sector.
Experts point out that such transactions may result in stronger capital bases, better technology transfer and increased regional integration of Kenya’s banking sector, besides leading to a higher level of competition among the market players.