A prominent Nigerian bank has acquired a controlling stake in Uganda’s Orient Bank.

This is a landmark move by Bank PHB into the East African market and raises the stakes in Uganda’s competitive banking sector.

The acquisition brings to four the number of West African-owned banks in Uganda.

Uganda has a largely untapped market potential of over 25 million clients from established and highly capitalised players both within and outside the region.

The other West African banks operating in Uganda are the United Bank of Africa, Global Trust Bank and Ecobank Transnational.

East African banks already in the market include Kenya Commercial Bank, Equity Bank and Fina Bank, all Kenyan owned.

Bank PHB reportedly paid $62 million for an 80 per cent stake of Orient Bank Limited.

This is a record breaking pay out in the history of Uganda’s banking industry.

The previous record was attributed to Barclays’s takeover of the former Nile Bank in 2006. Industry sources estimated the deal at $24 million.

The acquisition is expected to provide Bank PHB with a sound local platform to roll out massive retail banking services, similar to those in its Nigerian operation.

The deal will also boost Orient Bank’s product base and branch network across Uganda.

“We are architects of value. We pursue commercial excellence in ways that create superior value for our customers through a wide range of products and services,” said Francis Atuche, chief executive officer of Bank PHB.

The takeover is a strategic boost to Orient Bank’s capital base, which has been a big hurdle to its expansion efforts recently.

Established in 1993, Orient Bank has only nine branches to date, despite acquiring the former Trans Africa Bank in November 2002.

The acquisition was conservative, compared with that of younger players in the market such as DFCU Bank — with over 15 branches just eight years after inception.

Orient Bank’s total assets are currently valued at Ush236 billion ($119.8 million), compared with DFCU Bank’s Ush400 billion ($203 million).

Orient has posted a remarkable growth in deposits, loan portfolio and profits since inception.

Last year, it registered 32 per cent growth in customer deposits, which hit Ush182.2 billion ($92.5 million).

It recorded 39 per cent growth in loans and advances — reaching Ush110.9 billion ($56.3 million).

Profit before tax also grew by 26 per cent to Ush10.2 billion ($5.2 million).

Orient Bank chairman Michael Cook says the takeover will help diversify the bank’s retail products significantly. However, Bank PHB’s re-investment targets are still unclear.

Meanwhile, Bank PHB has also seen robust results in recent years, with gross earnings growing by 142 per cent to 87 billion naira ($837 million) in 2008.

Profit before tax rose by 160 per cent to 26 billion naira ($220 million) in the same period. Deposits also increased by 135 per cent to 718 billion naira ($6 billion).

Bank PHB is also set to enter the Kenyan market and the Democratic Republic of Congo by the end of this year, said a source in the bank.

Last year, an acquisition deal for the bank mooted by a consortium of the International Finance Corporation, DEG (the Germany Development Bank) and the Bank of Muscat flopped due to disagreements on pricing and management strategy.