African markets

Kenya: KCB targets Equity with the acquisition of a bank of 15 billion shillings in the DRC

KCB Group agreed to acquire a majority stake in a major bank in the Democratic Republic of Congo for an estimated 15 billion shillings, opening a new battlefront with Equity Bank in the vast, mineral-rich Central African country.

KCB, which already has operations in Rwanda, Burundi, Tanzania, Uganda and South Sudan, said it had reached an agreement to acquire an 85% stake in Trust Merchant Bank and plans to buy the remaining shares of two years from now.

Kenyan commercial banks are looking beyond their borders for acquisitions, seeking to exploit opportunities in East and Central Africa through rapid economic growth and trade integration, with the DRC the new target.

The deal will see KCB go head-to-head with Equity, which entered the DRC in 2015 through a takeover and grew its market share in 2020 after acquiring another lender, Banque Commerciale du Congo ( BCDC).

Banks have long coveted Africa’s top copper-producing nation, lured by lending opportunities, fees and transaction income in the lucrative market.

Equity, the only local lender present in the DRC, made a gross profit of 4.6 billion shillings, which is higher than the combined profits of 4.4 billion shillings that the seven Kenyan banks made in Uganda.

“The transaction is expected to close by the end of the third quarter of 2022, subject to regulatory, shareholder and other approvals,” KCB Group Chairman Andrew Wambari Kairu said in a statement.

“This will see KCB acquire 85% of TMB’s shares while existing shareholders will continue to hold the balance for a period of at least two years, after which KCB will acquire their shares.”

KCB did not disclose the value of the deal, but said it would buy the majority stake at 1.49 times book value from Trust Merchant Bank. Three analysts contacted by the Business Daily estimated the deal was worth 15 billion shillings.

Equity in 2019 paid 10.7 billion shillings to a wealthy family to acquire a 66.5% stake in BCDC. The Kenyan bank already had a subsidiary in DR Congo, which it acquired in May 2015, and integrated the two banks in a merger that created the Central African nation’s second-largest bank.

Trust Merchant Bank is the third largest bank and is based in Lubumbashi, home to several of the DRC’s largest mining companies. The country produces more than three percent of the world’s copper and half of its cobalt, most of which comes from the Katanga region.

The DRC is one of the largest countries on the continent by land mass and has a population of over 90 million, making it attractive to ambitious lenders looking for growth on the continent.

The market is primarily focused on serving the large companies operating in it, making it necessary to have a big balance sheet to be able to compete and grow, an analyst said.