Like a set of twins difficult to tell apart, KCB and Equity Bank have appeared almost the same to investors in the market.
At the Nairobi Securities Exchange, where value is determined, one share of KCB is Sh37.8 and a share of Equity bank is Sh36.
But like rival wives, the two of Kenya’s most competitive lenders grovel in rivalry, strategize getting ahead of each other and have shaped the banking culture that has come to define Kenya’s dominance in the East Africa region.
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One of the stages the rivalry plays out is the announcement of banking results, the two lenders unveil their financial performance within days of each other and every quarter take turns at comparing their height.
This year they took turns comparing the shortness, KCB made the bold move of admitting it had seen a 40.4 per cent decline in net profit for the nine months to September of Sh7.5 billion compared to Sh12.7 billion the year before.
Equity Bank could breathe a sigh of relief since it was holding its breeches finding a way to declare a 13.9 per cent net profit decline to Sh15 billion in the nine months to September from Sh17.4 billion last year.
Equity bank boss Dr. James Mwangi had come out on top of his peer KCB boss Joshua Oigara.
He could breathe easy having slipped from KCB over the last one year over which bank would finish the long marathon to be the country’s largest bank by assets.
This title had been fought over from two battle fronts, regional expansion and local customer acquisition. Lately it had turned into mergers and acquisitions.
KCB drew first blood when it made a strong case to buy imperial bank assets. The lender had collapsed and KCB had been taking care of the invalid, it had a view of its knickers and knew which books were good and which were irredeemable.
Eventually KCB gained Sh3.2 billion at no cost to the bank. Could this be the secret formula for the lender, it certainly was a strategy vulturing over the Kenyan banking system that had caught a contagion after the collapse of Imperial, Dubai and Chase Bank.
KCB went after National Bank a lender it had coveted for a very long time since they shared government ownership and the bank carried a huge public sector portfolio which are usually guaranteed significant cash flow.
National Bank was in trouble with its capital washed away after losses and dud loans that had grown from Sh2.2 billion in 2012 to Sh32.4 billion by the end of June 2019, left it illiquid and in need of emergency loans from the Central Bank of Kenya.
Acquiring this bank cheaply then pumping Sh8 billion into NBK, and overhauling its entire board made KCB a Sh972 billion asset bank. It was on course to be the first Sh1 trillion Kenyan bank.
Equity Bank was not sitting pretty, it had announced plans for a grand strategy that would both expand its physical footprint and assets in locations. It had presence through purchasing four banks in Rwanda, Zambia, Mozambique and Tanzania from Atlas Mara for Sh10.7 billion.
Atlas Mara had been struggling too, and these banks were spread out and risky so Equity opened another front. Within six months of announcing the Atlas deal, it said it had entered talks to buy Banqué Commerciale du Congo’s (BCDC).
BCDC take over for Sh10.5 billion which it intends to merge with the Equity Bank Congo S.A (EBC) was the deal that panned out after Equity dropped the Atlas Mara negotiations.
Now Equity had assets of Sh933.9 billion and suddenly again we have a race for who will be Kenya’s first trillion shilling bank by 2021.
In fact, while at it, Equity made a show for its shareholders funds at Sh137.5 billion having tipped over KCB’s Sh139 billion.
J Cole, the American Hip Hop artists says “the good news is you came a long way, the bad news is you came the wrong way”.
A big ship gets plied with wind more than a lean ship and during the Coronavirus pandemic that tempest has been in the form of loan defaults.
As at September this year, KCB Non-Performing Loans (NPLs) stood at a whooping Sh51.9 billion while Equity Bank NPLs were equally high at Sh51.7 billion.
In fact the decline in profits for both the banks was directly attributed to setting aside revenues made for provisioning. KCB loan loss provisioning jumped from Sh5.8 billion to Sh20 billion while Equity Bank’s loan loss provision jumped from Sh1.3 billion to Sh14.3 billion.
In fact, a bigger problem lies in the loans that were restructured. KCB having extended repayment or suspended principal payments for loans of up to Sh105 billion while Equity Bank renegotiated loans of up to Sh90 billion.
It is a fact that after the pandemic, many companies will not come back, many will be barely surviving and some of the restructured loans will sadly not be repayable.
Then the two biggest lenders may open open a new rivalry, competing for space at the auction pages at the back of Kenyan newspapers.
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