Equity Group Marches on Across Africa With Fresh Congo Purchase

NAIROBI (Capital Markets in Africa) – Equity Group Holdings Plc plans to buy a lender in the Democratic Republic of Congo, its second acquisition in five months, as part of the Kenyan bank’s strategy to expand across Africa.

Directors agreed to enter a “non-binding term sheet with certain shareholders of Banque Commerciale du Congo for the purchase for cash of a controlling stake in BCDC with a view to eventually amalgamating the business of BCDC with that of EGH’s existing banking subsidiary in DRC,” Equity said in an emailed statement on Monday.

Equity did not reveal how much it will pay for the stake in the Congolese lender established in 1909. If completed, the deal would propel Equity to Congo’s biggest bank after Rawbank Sarl, according to George Bodo, country representative for ratings agency Agusto & Co. in Kenya.

Equity shares rose 4.7% by 3:00 p.m. in the Kenyan capital, Nairobi, the most in 8 months.

Africa Expansion
In April, Equity agreed to swap 6.27% of its shares in exchange for Atlas Mara Ltd.’s operations in Rwanda, Zambia, Mozambique and Tanzania, a transaction valued at about $106 million. Kenya’s biggest lender by market value now has operations in eight African nations and aims to be in 15 markets on the continent by 2026.

Having risen from a building society to one of Kenya’s biggest lenders, Equity doesn’t have much room for meaningful expansion in its home market, where an interest rate cap on commercial lending has curbed lending to businesses and individuals.

The move to Congo, which has a higher margin environment compared to Kenya, is positive, according to Faith Mwangi, a senior investment analyst at Tellimer Markets Inc.

“This has to be looked at differently from the Atlas Mara deal because Congo is a market that is under-penetrated and with high margins,” she said by phone. “The opportunity in Congo is clearer. They have already had success in that market considering the ProCredit acquisition.”

The Kenyan lender bought ProCredit Bank Congo SA in 2015 — now renamed Equity Bank Congo — and has grown the unit’s value to 60 billion shillings ($578 million) from 15 billion shillings, Chief Executive Officer James Mwangi said in March.

Nevertheless, Moody’s Investors Service last week said banks in Congo face “very difficult credit conditions as a result of high credit concentration, rapid credit growth and dollar-denominated lending.”

Equity has also set up a representative office in Ethiopia, the second Kenyan lender after KCB Group Plc to do so as the Horn of Africa nation opens up its financial sector. The market of 108 million people has 18 commercial banks, while Congo’s 83 million people are served by a similar number of banks. Kenya, in contrast, has 42 banks for 48 million people.

Source: Bloomberg Business News