Kenya’s biggest bank by assets is in talks to acquire a lender in the Democratic Republic of Congo, the vast mineral-endowed central African country.
KCB Group’s plan is to acquire an existing lender in the next four months.
“We’re engaging with two institutions today that are in Congo,” KCB Group Ltd. Chief Executive Officer Joshua Oigara said on Thursday. The bank will settle on a single purchase, preferably one with a “national footprint, available in all provinces,” Oigara said, without giving more details.
The regional lender — with more than Ksh1 trillion ($9.17 billion) worth of assets — is in negotiations with “two to three banks” in the DR Congo, as it looks to settle in Kinshasa by the end of the year.
In 2020, KCB, which is listed on the Nairobi Securities Exchange, suspended its cross-border expansion plan due to the Covid-19 crisis. Mr Oigara’s other focus is Ethiopia. “Ethiopia is on the way so I don’t have comment on that for now. We are just waiting,” he said.
KCB has operations in Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan and a representative office in Ethiopia.
In November 2020, KCB strengthened its business in Rwanda and Tanzania by acquiring Banque Populaire du Rwanda Plc (BPR) and African Banking Corporation Tanzania (BancABC) respectively owned by the British financial services conglomerate Atlas Mara Ltd. Under the deal, KCB acquired a 62.06 percent stake in BPR and a 100 percent stake in BancABC.
KCB Group is expected to double its market share and become the second-largest lender in Rwanda upon acquisition of BPR and among top 10 banks in Tanzania after the acquisition of BancABC.
In 2019, KCB acquired the state-owned National Bank of Kenya and took over the good assets of Imperial Bank, which was put under receivership by the central bank on October 13, 2015, owing to financial mismanagement and fraud by its directors.
KCB’s Kenyan rival, Equity Group Holdings Plc, beat it to entry into the DRC market of more than 92 million people. Equity Group now owns the second largest of the nation’s 17 commercial banks.
The lenders have for long coveted Africa’s top copper-producing country, where China Molybdenum Co. plans to double the size of its giant copper-and-cobalt unit with a $2.5 billion investment and Glencore Plc intends to reopen its mine in the country after two years.
The Nairobi-based bank sees opportunity in lending, fees and transaction incomes, funding manufacturing and expanding its customer base in the DRC.
The DRC is more open to allowing foreign lenders to set up shop than Ethiopia, where KCB is also keen on an acquisition, KCB Chairman Andrew Wambari told an investor briefing on Thursday.
“We don’t want to go into greenfield anymore there,” Wambari said, adding, “mergers and acquisitions is something we’ll continue to do, but very selectively.”
Until banking regulations in Ethiopia change in favor of foreign participation, Congo will be the next market for KCB, Oigara said.
In the meantime, the lender doubled its six-month profit to $139.6 million and plans to channel funds it would have spent on an interim dividend on concluding other acquisitions in Rwanda and Tanzania instead. That will add 100 billion shillings to its more than 1 trillion-shilling balance sheet.
A Congo entry would also enable KCB to quickly double its foreign-currency loan portfolio, which is equivalent to about 45 billion Kenya shillings currently, Oigara said.
The bank plans to triple its loans to small and medium businesses to 150 billion shillings in the next two years and ramp up mobile phone-based lending, according to Oigara. “We do expect to reach 200 billion shillings in mobile lending in the next two years. This year we should exceed 100 billion shillings,” he said.
KCB also plans to grow its green financing loan book fivefold in two years from about 75 billion shillings currently, Oigara said.
The bank’s shares fell 3.1% by 2:48 p.m. in London, as investors disappointed about the lack of a dividend sold.