Equity Group has moved to strengthen its Democratic Republic of Congo (DRC) banking business with a new proposed purchase of a controlling stake in the Commercial Bank of Congo (BCDC).
Upon the deal’s completion which remains the subject of both shareholder and regulatory approval, Equity Group will move to amalgamate the BCDC business operations with that of its already operational subsidiary in the country.
The transaction sits alongside Equity Group’s long-term quest of becoming a Pan-African Bank in a push that has seen it enter four other markets in the region since its humble micro-finance beginnings in Kenya in the mid 80’s.
“By acquiring BCDC, Equity Group will be able to expand its footprint in Africa. Further, Equity aims to provide access to competitive, tailored financial services to improve people’s livelihoods whilst delivering significant value to its stakeholders,” said Equity Group Managing Director James Mwangi in a statement to the Capital Markets Authority (CMA).
The proposed transaction comes on the back of yet another ongoing deal involving the acquisition of the distressed assets of London listed Atlas Mara in an affair that will see Equity venture into Zambia and Mozambique.
Further, the Ksh.10 billion transaction will strengthen Equity’s already established positions in Rwanda and Tanzania.
At the same time, Equity Group has most recently opened a representative office in Ethiopia with a view of starting operations in the now liberated market.
The DRC lure
The Democratic Republic of Congo features as the most improved subsidiary for Equity, partly informing of the lender’s consolidation in the market which has an approximated population of 81.3 million.
In six months to June 30, DRC represented the second most profitable unit after Rwanda having registered net earnings after tax of Ksh.600 million across the period, representing a 16 percent jump in earnings from 2018.
Further, the DRC outfit topped in both deposits and loan growth for Equity Bank having seen deposits and loans soar by 43 and 21 percent to Ksh.54.3 billion and Ksh.27.1 billion respectively.
At the same time the Group’s operational ratios have been on the rise.
The units return on assets and equity (RoAE) for instance went up to Ksh.17.9 billion from Ksh.16.4 billion over the half-year review period.
DRC’s macros have also been attractive with an expected inflation rate of 4.5 percent in 2019, the lowest in Equity’s operations, while the local currency- the Congolese franc has marginally depreciated against the US dollar in the year to date in comparison to its peers.
However, the market is not all smooth sailing having carried a comparatively worse off cost to income ratio and return on average assets (RoAA).
Prior to Monday’s disclosure by the bank on the new DRC deal, the bank was set to close in on an expanded 14.5 million customer base composing of 291 branches, 699 Automated Teller Machines (ATMs) and 46,844 agents outlets.
The BCDC is currently majority owned by Belgian tycoon George Arthur Forrest and family and has an asset base in excess of Ksh.71 billion.