Barclays Bank of Kenya has finally concluded the transfer of its custody services business to Standard Chartered Bank Kenya effective from October 31st. The proceeds of the transaction, valued at Kshs 3.5 billion, will be re-invested in the bank’s business and help improve shareholder earnings. The funds will also be used to upgrade the bank’s core banking platform to a level that will support its future growth.
This move is expected to raise the stakes in the lending market as the industry’s players such as Kenya Commercial Bank, Standard Chartered, Housing Finance and Family Bank have all intensified their expansion and fund raising plans.
Barclays PLC exited the global custody business outside Africa in 1998, and the lack of a global operation made the African custody business less competitive and denied it synergies, prompting it to sell to StanChart, which had similar businesses in other market such as Asia and Middle East.
If the funds flow to Barclays lending business, this would give the bank access to cheap fund that will allow it to offer competitive lending rates in the increasingly competitive loans market or boost its interest margins.
This comes at a time when local banks are facing shrinking interest margins, the difference between lending and deposit rates, because of the drop in lending rates in the first half of the year. Lending rates fell by between 1.5 and 3.5 per cent as they race to get a firm grip of the lending market with the recovering economy making consumers less wary of borrowing as lenders loosen their purse strings.
With the blue chip banks - such as KCB, Equity Bank and CFC Stanbic - having announced plans to deepen their entry in the lending business, Barclays Bank has renewed its focus on the lending market, especially on personal loans market and mortgage business, amid rising economic optimism that has dimmed fears of high defaults among salaried workers.
Dyer and Blair
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