Nairobi, 16 September 2008 – Mergers and Acquisitions in the Banking Industry in Sub Sahara Africa is likely to drive the growth of the Banking markets over the coming years. According to the PricewaterhouseCoopers’ (PwC) report entitled “Into Africa: Investment prospects in the Sub-Saharan banking Sector* ”, Sub- Saharan Africa, once seen as unpromising and overly risky, is now one of the world’s fastest growing emerging Banking markets.

The growth is driven by improved economic environment as well as increasing customer affluence creating a fresh demand for banking services. Soaring oil and mineral prices have helped certain countries. In the past, poor infrastructure and limited branch networks restricted the access to banking services. Today, regional banks are investing in the development of their distribution networks – a process that includes both new branches and innovative e-banking solutions to bring formerly hard-to-reach customers into the banking orbit.

Improved prospects in the regions’ regulatory and macro-economic management coupled with high economic growth have helped the region attract increasing levels of Foreign Direct Investment (FDI). Aggregate reported FDI into the region grew from US $4bn in 2004 to US$7bn in 2006. Banking sectors in the region are also benefiting from market reforms including liberalisation and tougher regulatory standards.

Opportunities for further growth in the banking market are vast as there appear to be between 40 and 60 million potentially bankable customers in sub-Saharan Africa wither fewer than half being served today. Further, demand for banking services is likely to expand and become more sophisticated as regional economies move up a gear and wealth begins to permeate a growing consumer class. Also, the retail and corporate banking sectors are at a relatively early stage of development, offering international groups an opportunity to leverage both their expertise and capital.

“Although the banks in Sub Sahara Africa face a number of challenges, the prospects and opportunities are positive. In response, established banks are expanding their branch networks and product offerings - hence attracting sufficient capital to support the growing business becomes critical”, said Naval Sood, PricewaterhouseCoopers Transaction Services Leader.

The report highlights that strong international and regional players have been acquiring stakes in the banks in the region with African banks also expanding to other markets on the continent. The report observes that while organic growth still remains an option, it can take many years to develop to a competitive scale. Hence, strategic partnerships with commercial banks and other financial institutions have become a more desirable option in the recent past. Whilst International banking groups already
have a strong presence in several regional markets, recent acquisitions herald the onset of a fresh wave of investment – with international banks competing strongly with established regional and Pan-African players.

For example, over the past year, three of the most significant foreign investors who have acquired a bigger foot print in Kenya include Ecobank, Helios EB Investors LP and Standard Bank of South Africa. Further, Kenyan banks such as Equity Bank have expanded into neighbouring countries through acquisition.

“We work with many financial institutions who are thinking of alliances and acquisitions to build a competitive presence in local and regional markets. Navigating through the regulatory maze and structuring the transactions to help ensure that they deliver the anticipated returns remains tricky. But, we hope to help our clients secure a share of this exciting growth.” added Mr. Sood.