Analysts are predicting a strong uptake of Bank of Kigali shares following the launch of its IPO on Thursday.

Market analysts base their prediction on a strong performance in the share driven by the fact that the bank is an industry leader in the country, with a 25.9 per cent, 27.4 per cent and 31.5 per cent market share in deposits, total assets and loans respectively — all of which are set to rise with incoming funds.

The government is offloading 300.3 million shares or 25 per cent of its stake in BK.

Each share is selling at Rwf125.00 ($0.21) with a minimum application for 100 shares. The announcement of the allotment results will be made on August 12.

“We see the market share rising by 35 per cent in the next five years triggered by the duration matching, branch network expansion and retail segment refocusing” said an analysts at Dyer and Blair Investment Bank.

Proceeds from the sale will support the expansion of BK’s investment portfolio and help the government finance its budget for the 2011/12 fiscal year.

Specifically, BK is expected to use the capital to invest in branch expansion, electronic channels of infrastructure and expand its loan book.

Net loans grew by 31.5 per cent in 2010 amounting to Rwf101, 403 million ($170.6 million) from Rwf 77,096 million ($134.5 million) in 2009.

Analysts expect the IPO to generate solid interest from local, regional and foreign investors as the country’s low banking penetration estimated at 22 per cent banking assets to GDP and just 14 per cent of non-micro finance penetration offers headroom for growth.

According to the bank’s audited financial statement, the bank’s assets grew from Rwf 151,896 million ($265 million) in 2009 to Rwf 197,677 million ($333 million) as at December 2010.

Celestin Rwabukumba, the operations manager of Capital Market Advisory Council, said the offer is expected to generate more interest from local investors due to increased public awareness following the country’s first IPO last year by Bralirwa — Rwanda’s largest brewery which was oversubscribed by 174 per cent.

Bralirwa’s share price has surged from Rwf 136 ($0.2 — the initial listing price to Rwf220 ($0.37 cents) last week with over 30 million shares traded with a turnover of about Rwf5 billion ($84,317.0).

“There is a lot of appetite from the local market because it’s better organised and also positive performance of Bralirwa,” Mr Rwabukumba said.

Investors however might be keen on the threats facing the bank in the medium term.

According to analysts at Dyer and Blair growing competition globalisation and technology trends pose as new competition fronts.

“New banks are interested in the Rwandan market as well as telcom (including MTN) companies offering money transfer solutions. Scarcity of skilled banking professionals – banks compete for few staff putting a strain in their capacity to expand and also pushing up staff costs,” said the analysts.

While government plans to halve its shareholding in the bank from 66 per cent to 30 per cent after the offer, it still remains the largest shareholder in the bank.

The offer period is expected to close on July 29 while the shares will commence trading on the Rwanda Stock Exchange on August 29.