Why Access Bank Is Injecting Sh 1.9 billion into Its Kenyan Subsidiary

Read Time:2 Minute, 5 Second

Access Bank Plc is injecting $15 million (Ksh 1.9 billion) into Access Bank Kenya after securing a “No Objection” from the Central Bank of Nigeria (CBN).

The capital will boost the bank’s liquidity, reinforce its capital base, and support the integration of National Bank of Kenya (NBK), which was acquired in a deal estimated at $100 million.

The merger increased Access Bank Kenya’s branch network from 23 to over 100, but also introduced operational and financial challenges.

The funds will also support Access Bank’s efforts to grow its footprint in Kenya, East Africa’s largest economy. The bank is looking to scale its operations and compete more effectively with established lenders such as Equity Bank, KCB Group, and Standard Chartered.

The capital will be used to grow its retail banking operations, expand SME lending, and upgrade digital infrastructure.

The Central Bank of Kenya (CBK) enforces strict capital adequacy standards. Commercial banks must maintain a minimum core capital of KES 1 billion (approximately $7.7 million), a core capital to risk-weighted assets (RWA) ratio of at least 10.5%, and a total capital to RWA ratio of 14.5%. A capital conservation buffer of 2.5% is also required.

These standards are intended to ensure banks remain stable and are able to absorb financial stress. The capital injection will help Access Bank Kenya meet these requirements, especially after taking on NBK’s weaker capital position.

This move is part of Access Bank’s plan to expand its operations across the continent. Kenya’s position along African trade corridors, particularly under the African Continental Free Trade Area (AfCFTA), makes it a key market.

The capital will also support integration costs, including system upgrades and workforce retention.

As part of the acquisition conditions, Access Bank is required to retain at least 80% of NBK’s 1,384 employees for one year, as directed by the Competition Authority of Kenya.

In August 2023, Access Bank Kenya had also received $7.5 million (KES 1 billion) from Access Holdings Plc to improve capital and support growth plans. That funding came from a $500 million Tier I capital raise by Access Holdings in 2021.

The capital was used to fund expansion and meet regulatory targets.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.