East Africa’s top retail banks are scrambling for control of the Congolese market, going by the latest acquisitions.
KCB Group this week announced it had entered into an agreement to acquire 85 percent shareholding in Trust Merchant Bank (TMB), one of the DR Congo’s largest banks, with a deal for a full takeover after two years.
The acquisition gives KCB a foothold in an economy with estimated market size of 85 million people and which has now joined the East African Community.
Other regional lenders that have been attracted here include Equity Bank and Tanzania’s largest lender by assets CRDB.
The KCB transaction is expected to be concluded between October and December, subject to shareholder and regulatory approvals.
In a statement, KCB said it would pay for the shares through a cash consideration based on the net asset value of TMB at the completion of the proposed transaction and using a price-to-book multiple of 1.49.
KCB did not disclose the value of the deal but an independent estimation by The EastAfrican based on TMB’s audited financial statements for 2020 gives a net asset value of Ksh12.26 billion ($103.91 million), translating to a price of Ksh18.27 billion ($154.83 million) for the entire stake and Ksh15.53 billion ($131.61 million) for 85 percent stake.
TMB, with more than 110 branches, is a public company limited by shares and one of DRC’s largest banks with $1.5 billion in assets. It has a strong offering in retail, SMEs, corporate and digital banking.
“We are very excited about the opportunities KCB offers in this transaction and we are proud to bring our unique DRC insights and experience to the KCB Group,” said Robert Levy, TMB Chairman.
In 2021 KCB acquired 62.06 percent stake in Banque Populaire du Rwanda (BPR) from the British financial services conglomerate Atlas Mara Ltd and later increased the stake to 76.67 percent by acquiring additional 14.61 percent of the shares from the minority shareholders.
The transaction increased KCB’s assets by 15.4 percent to Ksh1.13 trillion ($9.57 billion).
Currently, KCB has operations in Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan and a representative office in Ethiopia.
However, its Pan-African expansion bid suffered a temporary setback after failing to acquire Tanzania’s African Banking Corporation Ltd (BancABC) due to regulatory hurdles.
The DRC has become a key target market for EA lenders despite security threats in the eastern parts of the country that have affected operations of some banks.
Tanzania’s largest retail bank by assets CRDB, riding on financial backing from the Norfund of Norway and the Investment Fund for developing countries of Denmark, has announced entry into the DRC by setting up a subsidiary in the large commercial city of Lubumbashi, in south-east DRC near the Zambian border.
The subsidiary is expected to be launched before the end of the year, having already secured regulatory clearance from the Bank of Tanzania in May 2021.
Under the deal, IFU and Norfund will each take a 22.5 percent equity stake, with CRDB retaining a majority 55 percent share in the $30 million subsidiary.
Equity Group Holdings Ltd already has a presence in the country through the acquisition of 86 percent stake in German bank ProCredit between 2015 and 2017, which it renamed Equity Bank Congo (EBC).
In August 2020 the lender completed the acquisition of 66.53 percent stake in Banque Commerciale Du Congo (BCDC), DRC’s second-largest lender by assets, at a price of $95 million.
Equity Bank Congo was then merged with BCDC to form EquityBCDC, to create an institution with Ksh1.12 trillion ($9.49 billion) worth of assets.
KCB Group’s net profit for 2021 jumped 74 percent to Ksh34.2 billion ($289.83 million) from Ksh19.6 billion ($166.1 million) in 2020 buoyed by increased revenues from trading operations and by over 50 percent reduction in loan loss provisions.
Regional subsidiaries' contributions to the bottom line increased to 13.7 percent including Tanzania ($6.33 million), South Sudan ($8.03 million), Uganda ($2.36 million), Rwanda ($9.56 million) and Burundi ($4.54 million).