CIB Kenya is exuding confidence that it will comply with the tenfold increase of the minimum core capital requirement for Kenyan banks over the next five years.
Under news laws adopted in late 2024, the core capital requirement for banks will rise in annual increments from the current KSh 1 billion to KSh 3 billion at end-2025, and eventually KSh 10 billion by end of 2029.
In an interview with The Kenyan WallStreet, CIB Kenya says it has implemented proactive measures to fulfil these new requirements, noting that the additional capital will support expansion plans, product innovation, and improve service delivery, all of which align with the bank’s long-term goals.
“CIB is prepared to invest additional capital to meet regulatory requirements seamlessly. Higher capital buffers will enhance resilience against economic shocks and ensure long-term stability. Consequently, this increase will enhance infrastructure, technology, and human resources,” said Islam Zekry, CIB Group’s Chief Finance and Operations Officer.
“This capital boost allows CIB Kenya to compete more effectively for market leadership. It also enables the bank to strategically allocate capital to high-growth sectors, driving profitability and enhancing customer confidence,” he said.
In April 2020, the Egypt-headquartered CIB acquired 51% of Mayfair Bank Kenya for KSh 3.7 billion, marking its first venture into sub-Saharan Africa. The bank then acquired the remaining 49% in January 2023, solidifying its regional footprint and buttressing its regional expansion in Kenya.
Given Kenya’s economic growth, CIB Group’s CFO says the lender recognizes numerous opportunities across its market. These include economic potential, cross-border trade, regulatory environment, SME Sector, fintech influence, youthful population, innovative ecosystem, and resilience and growth.
He says the country’s flexible regulatory approach supports innovation and facilitates cross-border transactions, making it easier for businesses to engage in trade activities.
“Kenya’s economic potential and advantageous trade environment are significant. Its vibrant SME sector presents an important area for tailored financial support. Furthermore, the country’s fintech development and youthful tech-savvy population offer vast opportunities for collaboration and digital-first financial solutions,” Zekry says.
“Together with Kenya’s economic growth and conducive trade environment, these factors contribute to cultivating an innovative ecosystem that offers collaborative opportunities for new banking solutions, fostering resilience and growth throughout the market.”
The progressive raising of the core capital threshold will reshape banking in Kenya. While it is primarily meant to build stronger banks that can withstand shocks, its effect over the next few years is likely mergers, acquisitions, and capital injections. According to rating firm Fitch, 14 banks of the 39 licensed banks in Kenya had had over KSh 10 billion core capital at end of the third quarter of 2024, with their robust domestic and regional franchises continuing to support their strong financial profile metrics.
Another seven banks, mostly second-tier, are also expected to achieve compliance by end of 2029 through earnings retention due to their reasonable profitability.
“The remaining 17 banks, which together account for just 7% of sector assets, are unlikely to be able to comply through earnings retention alone due to their large capital shortfalls and weak profitability. However, many are subsidiaries of regional banking groups that view Kenya as an important market, so we expect them to receive capital injections,” Fitch noted in its analysis.
”Capital injections for small domestically owned banks are less certain. They tend to have weak franchises and high non-performing loans, are sometimes loss-making and, in a few cases, are in breach of regulatory capital ratio requirements. We think these banks are far more likely to be subject to M&A activity,” Fitch notes.
According to Zekry, a strengthened balance sheet will support future innovation, market expansion, and the evolving needs of CIB Kenya‘s customers.
In the short term, CIB Kenya says it has no immediate plan to expand physical branch network. Instead, it is prioritizing the digitization of financial services to enhance accessibility, convenience, and efficiency for customers.
“By leveraging digital platforms, we aim to reach undeserved and remote communities without the constraints of physical infrastructure. This approach allows us to offer seamless, secure, and real-time banking experiences and customer support, all accessible through mobile and online channels,” Zekry says.
“In a market with high mobile penetration and growing digital adoption, this shift not only aligns with evolving consumer behaviors but also supports our broader financial inclusion and economic empowerment goals. Through enhanced portfolio monitoring, forward-looking risk assessments, and proactive engagement strategies, we are ensuring that exposures are closely managed.”
“This approach enables us to maintain prudent provisioning practices and respond swiftly to any emerging credit deterioration, thereby preserving the overall resilience of our lending book,” he added.
