Bank of India (BoI) is looking at acquisition in Kenya to increase its presence in the East African nation. It plans to buy a bank to tap the high-margin business and support the growing Indian investments and trade there.
The Mumbai-based public sector bank already has four branches in Kenya. “The business is very profitable since it yields high margins. While in India the margin between cost of deposits and yield on advances is 3-4 per cent, it is 10-11 per cent in Kenya,” a senior BoI official said.
The bank is catering to the growing ethnic Indian community demand. There has also been an increase in investments by Indian companies across the sectors in recent years here. He said, “The increase in investments has thrown up new opportunities for banks, which we would like to tap by expanding our presence in the region, mainly through the inorganic route.”
“Some small Kenyan banks are in touch with us to explore prospects for acquisition. The process is still in a nascent stage,” a BoI official said. He, however, declined to name the target banks.
If the acquisition fructifies in Kenya, this would be the second instance of an overseas acquisition for BoI. During FY 2007-08, the Bank acquired a 76 per cent stake in PT Bank Swadesi Tbk, Indonesia.
According to Central Bank of Kenya data, the country had 45 financial institutions at the end of June 2008. The banking sector in Kenya has expanded quickly, with branch network increasing by 44.6 per cent, from 534 branches in June 2007 to 772 branches in June 2008. The operating foreign exchange bureaus increased from 96 to 109 in this period.
BoI, a Mumbai-based large public sector bank, has a presence in other African countries also. It has a representative office at Johannesburg, to be soon upgraded into a branch. The bank has set up a 100 per cent subsidiary in Tanzania and has a stake in the Indo Zambia Bank.
BoI’s overseas deposits rose by 22.87 per cent to Rs 30,221.7 crore at the of March 2009, as against Rs 24,596 cr a year earlier.
