DRC Tipped To Shape Growth Of Top Kenyan Banks

 

A side-by-side image of Eguity Group CEO James Mwangi and his KCB counterpart Joshua Oigara. PHOTOS | COURTESY

The Democratic Republic of Congo (DRC) has been tipped to shape the future growth of

Kenyan top banks.

According to analysts at Sterling Capital, the market is for instance Equity’s big driver of future growth as the lender carves out a Pan-African growth strategy.

“The Group continues to enjoy sustained momentum from its DRC unit and we expect the momentum to continue as supported by the Group’s 2022 guidance,” said analysts.

Equity Group is expected to switch its DRC loan book from a majority corporate clientele base to small and medium enterprises (SMEs) which presents higher yields than those of the corporate book.

In the financial year closing December 2021, DRC was Equity’s second fastest growing and most profitable subsidiary having posted a 441 per cent growth in net profit in the period to Ksh.4 billion.

The unit helped firm up the contribution of the Group’s subsidiaries to the lender’s bottomline at 21 per cent.

At the same time, success in the DRC is likely to determine which of Kenya’s top banks remains at the top of the mountain.

For instance, while the entry and subsequent expansion of Equity in the DRC has propelled it to the status of Kenya’s largest bank by asset base, peer KCB is yet to break ground in the frontier market.

Analysts at Sterling Capital expect this to change if the Group is to hit its 2023 target of reaching a balance sheet worth Ksh.1.5 trillion.

“While the Group’s growth is concentrated in the Kenyan unit, we believe that acquisitions and further subsidiary growth will continue to reduce sovereign risks and increase subsidiaries’ profit before tax (PBT) contribution,” added the analysts.

“We expect targeted expansion into the DRC and another target in Tanzania to drive asset growth in line with the Group’s 2023 Strategy.”

During the release of its full-year results on March 16, KCB management indicated it was angling for a new acquisition in the DRC this year to consolidate its position as a leading regional lender.

The modern day scramble and partition of the DRC by Kenyan top banks is expected to find further momentum from the admission of the market as part of the East African Community (EAC).

The inclusion of the market to the regional customs union is expected to make available numerous avenues for trade and investing between DRC and Kenyan businesses with commercial banks as a key linkage to the transactions.