FirstRand steps up Kenyan acquisition hunt as capital rules reshape the banking sector

South Africa’s FirstRand Group is pursuing a Kenyan bank acquisition as regional lenders compete for a larger share of East Africa’s financial services market. The group is targeting a smaller lender as it seeks to establish a broader presence in Kenya, where banking industry profits rose 16.3% to KSh241.65 billion last year.

FirstRand chief executive Mary Vilakazi said the group had stepped up its search for a suitable Kenyan lender after previously failing to complete a deal at the right price. The bank is also considering opportunities outside conventional banking, including insurance and investment banking, as it looks to expand its regional operations.

The acquisition strategy would give FirstRand a route into retail banking and other financial services beyond its existing activities in Kenya. The group opened a representative office in the country in 2012 to pursue infrastructure financing and project finance opportunities.

Vilakazi said FirstRand favoured acquiring a smaller lender and building its presence through organic growth rather than buying one of the country’s largest banks. She has also maintained that the group will not pay more than an asset is worth, making valuation a central consideration in its search.

Capital requirements could accelerate banking consolidation

Kenya’s planned increase in minimum core capital requirements for commercial banks is creating another incentive for lenders to consider mergers, acquisitions and strategic investments. The minimum requirement is set to rise from KSh1 billion to KSh10 billion under the transition, putting additional pressure on institutions that need to strengthen their capital positions.

For smaller banks, the changes could make raising fresh equity or bringing in a strategic investor more attractive. An acquisition could provide a buyer with an existing customer base, deposits, lending operations and regulatory infrastructure, while giving the acquired institution access to additional capital and a larger financial services network.

Melodie Ndanu, a research analyst at Standard Investment Bank, said the capital requirements could improve FirstRand’s negotiating position as smaller banks seek to strengthen their finances. She also pointed to slower growth in South Africa and the opportunity for FirstRand to deploy its diversified financial services platform in East Africa.

The potential for consolidation comes as Kenya attracts foreign lenders seeking access to a profitable banking industry and opportunities across neighbouring markets. The combination of domestic market growth and regional expansion prospects has made established Kenyan financial institutions attractive acquisition targets for regional banking groups.

Nedbank, Standard Bank and Absa pursue different strategies

FirstRand’s search follows Nedbank’s acquisition of a controlling stake in NCBA, a transaction that gives the South African group a substantial presence in Kenya and access to NCBA’s wider regional operations. TechTrendsKE reported on October 19 that Nedbank had completed its acquisition of a 66% stake in NCBA after receiving regulatory approval.

The deal was valued at approximately KSh110 billion in the supplied reporting. It also marked a major development in the competition among South African banking groups, with Nedbank beating Standard Bank, which operates in Kenya through Stanbic, to secure the stake.

Standard Bank has pursued a different route, combining its established Kenyan operation with ambitions to expand its market position. In June, TechTrendsKE reported that the group wanted to become Kenya’s largest lender by 2030, while a September report described its preference for organic growth despite having substantial resources available for acquisitions and other capital-allocation priorities.

Absa Group has also sought to deepen its ownership of its Kenyan business. The group initially aimed to increase its stake in Absa Bank Kenya from 68.5% to 85%, but its offer to purchase additional shares from existing shareholders at the Nairobi Securities Exchange attracted an additional 3.5% stake against its 16.5% target. Absa has maintained its intention to raise its ownership from approximately 72% to 85%.

The activity extends beyond South African banks. Access Bank completed its acquisition of National Bank of Kenya from KCB Group in 2025, while Nigeria’s Zenith Bank signed an agreement to acquire Paramount Bank, according to the supplied report. These transactions place FirstRand’s search within a broader contest among African financial groups for established banking platforms in Kenya.

Kenya offers a gateway to East African financial markets

Kenya’s appeal extends beyond the profitability of its domestic banking industry. Its position within the East African Community gives lenders a base from which to pursue business across neighbouring markets, including corporate finance, trade finance, infrastructure funding and cross-border payments.

The region’s economic growth provides an additional incentive for banks headquartered in more mature markets. South African lenders have been looking beyond their domestic market for opportunities to expand revenue, diversify earnings and serve businesses operating across several African countries.

FirstRand already has experience in other African markets through Rand Merchant Bank, its investment and corporate banking subsidiary, which operates in Nigeria. However, the group sold its Tanzanian business to Exim Bank of Tanzania in 2022 after establishing operations in the country in 2011.

The Tanzanian exit illustrates the importance of commercial returns in regional expansion decisions. FirstRand’s Kenyan strategy centres on finding an acquisition that can support its broader financial services ambitions while meeting its investment criteria.

Kenyan banks have also used regional expansion to reach new customers and markets. NCBA, for example, has identified the Democratic Republic of Congo and Ethiopia as potential destinations for further expansion, according to a September report by TechTrendsKE. Such ambitions demonstrate the strategic value that established regional banking networks can offer buyers and sellers.

FirstRand weighs African expansion against acquisition costs

FirstRand’s acquisition strategy also comes as the group reallocates capital across its international operations. The bank plans to reinvest proceeds from the sale of its UK motor-finance business, MotoNovo, into strengthening its presence in Africa.

The group reported earnings of R39.7 billion, equivalent to approximately KSh309.4 billion, for the year to June, representing a 5% decline. The earnings performance adds context to its focus on acquisitions that can deliver sustainable returns rather than pursuing expansion at any price.

For FirstRand, buying a smaller Kenyan lender could offer an entry point into a market where larger regional competitors have already established or expanded their positions. A successful transaction would provide the group with a platform for developing retail banking and other financial services, complementing its existing corporate and investment banking capabilities.

Vilakazi has said FirstRand is interested in opportunities across East Africa and is willing to consider businesses beyond banking. Her emphasis on finding a willing seller at the right price places commercial discipline at the centre of the group’s expansion strategy.

The contest for Kenyan banking assets now involves established regional groups with different approaches to growth, from large acquisitions to organic expansion and increased ownership of existing subsidiaries. FirstRand’s next move will depend on finding an institution that fits its ambitions for East Africa while meeting its expectations for value and long-term returns.

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