More South African banks eye Kenya as next expansion frontier

More South African banking giants are turning to Kenya for their next phase of expansion, betting that the East African nation offers the most compelling gateway into the region’s fast-growing but still underbanked markets, according to Bloomberg.

Lenders, including Standard Bank, FirstRand and Absa are increasingly targeting Kenya as growth opportunities in their home market remain constrained. The renewed interest comes a few weeks after Nedbank Group surprised investors with plans to acquire Kenya’s NCBA Group, signalling a shift in regional expansion strategies among South Africa’s largest banks.

At the heart of the move are new minimum capital requirements in Kenya, which are forcing smaller lenders to seek strategic partners or consolidation, creating a rare window for acquisitions.

The opportunity is attracting strong interest from across the continent, particularly from South African lenders seeking higher growth markets as profitability in their domestic economy slows.

The push into East Africa’s biggest economy also coincides with a broader retreat by global banks from Africa. International lenders such as Standard Chartered, BNP Paribas and Société Générale have scaled back operations across the continent in recent years, opening space for regional players to expand.

Nedbank’s proposed acquisition of NCBA underscores this shift, highlighting how African lenders are stepping in to fill gaps left by exiting global institutions.

Beyond South Africa, other pan-African banks are also targeting Kenya.

Nigerian banks also target Kenya

In January, Nigeria’s Zenith Bank secured regulatory approval to enter the market through the acquisition of Paramount Bank. The deal adds to a growing list of expansions by regional players.

Access Holdings, Nigeria’s largest banking group by assets, has been steadily building its Kenyan presence. It acquired Transnational Bank in 2020 and completed the purchase of National Bank of Kenya (NBK) from KCB Group in 2025.

Meanwhile, Dubai-based Soren Investment Company acquired Gulf African Bank, Kenya’s largest Islamic lender, further underlining the country’s appeal to foreign investors.

These developments reflect a broader recalibration of banking strategies across Africa. While Ethiopia’s recent liberalisation has drawn attention, Kenya remains the continent’s standout market — offering scale, regulatory depth, fintech sophistication and regional access unmatched in East Africa.

A recent report by Moody’s noted that many Western banks that once viewed Africa as “the next frontier” have been disappointed by returns. “Profitability, when adjusted for currency movements and capital weighting, has often fallen short of expectations,” the rating agency said.

Weak profitability, tighter regulation and rising competition from fintech firms have accelerated the retreat of global lenders, reshaping Africa’s $17.7 billion banking industry and creating space for local and regional players.

Another rating agency Fitch warned that the withdrawal of international banks could disrupt cross-border trade and remittance flows in the short term.

“In markets where foreign exchange liquidity is tight, access to hard currencies could become more difficult without the FX lines that parent banks provide,” it said in a report. “However, these challenges are likely to be temporary, as African banks generally retain strong access to funding from development finance institutions.”

According to McKinsey & Co., profitability across Africa’s top five banking markets — Egypt, Kenya, Morocco, Nigeria and South Africa — declined by about 2 percent between 2016 and 2022, prompting global banks to reassess their presence.

Local banks gaining ground

South Africa’s Absa Group, which fully separated from Barclays, has strengthened its performance, reporting a 17 percent rise in first-half profit in 2025. Morocco’s Banque Centrale Populaire and Attijariwafa Bank are also expanding aggressively across Francophone West Africa.

The exit of French lenders, in particular, has opened opportunities for fast-growing regional players such as Vista Group and Coris Bank International, which have been acquiring divested subsidiaries across the continent.

Vista now operates in 16 African countries, while Coris is expanding into markets such as Chad and Mauritania.

“French-owned subsidiaries were often constrained by conservative risk appetites and strict provisioning policies,” Fitch noted. “With their exit, credit growth is expected to accelerate, particularly in lower-risk segments.”

Despite short-term disruptions, analysts say the long-term outlook increasingly favours African-owned financial institutions.

According to African Business, local banks’ revenues rose by an estimated 12 percent in 2025 as they captured clients previously served by global lenders.

With the African Continental Free Trade Area (AfCFTA) expected to unlock up to $450 billion in intra-African trade by 2035, banks are positioning to finance a new wave of regional commerce.

Digital innovation and regional payment systems are also helping lenders bypass foreign exchange constraints by enabling transactions in local currencies — a potential game-changer for cross-border trade.

“We see significant opportunities for local and regional banks in Africa despite the challenges,” Fitch analysts said. “Pan-African banking groups with scale are increasingly well-positioned to compete with long-established global institutions.”