KCB finalises acquisition of DRC bank after regulatory approval

KCB Group will officially begin operations in the Democratic Republic of Congo after its acquisition of a majority stake in the Trust Merchant Bank received nod from regulators.

By VINCENT OWINO

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KCB Group will officially begin operations in the Democratic Republic of Congo (DRC) after its acquisition of a majority stake in the Trust Merchant Bank (TMB) received nod from

regulators, allowing it to expand its services into one of the continent’s most populated countries.

The Kenyan lender announced in a statement on Friday that it had received approvals from regulators in Nairobi, Kinshasa and the region’s trading bloc, the Common Market for Eastern and Southern Africa (Comesa) Competition Commission, to buy 85 percent of TMB.

The acquisition allows KCB access to the vast DRC market, with an estimated population of 90 million, expanding its foothold in the region’s markets amidst a scramble among the largest lenders to enter the DRC market after its entry into the East African Community earlier in the year.

KCB announced the acquisition deal with TMB shareholders in August, and is expected to close by end of this month. The lender said that “existing shareholders will continue to hold the balance (15 percent) for a period of not less than two years after which KCB will acquire their assets”.

Buy shares

The lender said at the time that it would pay for the shares through a cash consideration based on the net asset value of TMB at the completion of the proposed transaction and using a price-to-book multiple of 1.49.

TMB is one of DRC’s largest commercial banks, with an asset base of about $1.5 billion and is a publicly listed company limited by shares.  It has a strong offering in retail, SMEs, corporate and digital banking.

Its acquisition, KCB said, will enable the Nairobi-based lender to capitalise on its “18-year operational history, vast branch network, valuable local customer relationships and deep knowledge of local business dynamics” to expand its foothold in the market.

According to KCB, their expertise and experience in the banking industry will provide TMB’s existing and prospective customers with “enhanced banking products that is expected to grow and embed KCB’s brand in the DRC market and beyond”.

Common legacies

Paul Russo, KCB’s chief executive, said their common legacies of serving and supporting customers, businesses and communities will enable them, through the transaction, to “provide services that make a difference in people’s lives”.

“The acquisition extends our reach by providing customers access to a larger banking network and an expanded array of services,” Mr Russo said.

“Our shared banking philosophies will provide significant long-term value for our shareholders, employees and customers. I am incredibly excited about this opportunity and look forward to welcoming new customers and team members to the KCB family.”

KCB will operate both TMB and its insurance subsidiary Afrissur SA, under their current brands, but will “enhance the current business operating model with the capabilities KCB has built over time in systems and processes”.

Second acquisition

TMB now becomes the second bank in the region that the Kenyan lender has acquired in a span of two years in an expansion drive that has seen it become one of the largest commercial banks in the region.

In 2021, KCB acquired 62.06 percent stake in Banque Populaire du Rwanda (BPR) from the British financial services conglomerate Atlas Mara Ltd and later increased the stake to 76.67 percent by acquiring additional 14.61 percent of the shares from the minority shareholders.

Currently, KCB has operations in Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan and a representative office in Ethiopia.

It is not, however, the only bank in the region that has been eyeing the large DRC market since its admission into the East African Community.

Equity Group

Its arch rival in Kenya, Equity Group, already has a presence in the country through the acquisition of 86 percent stake in German bank ProCredit between 2015 and 2017, which it renamed Equity Bank Congo (EBC).

In August 2020, the lender completed the acquisition of 66.53 percent stake in Banque Commerciale Du Congo (BCDC), DRC’s second-largest lender by assets, at a price of $95 million.

Tanzania’s largest retail bank by assets CRDB, is also riding on financial backing from the Norfund of Norway and Denmark’s Investment Fund for developing countries to tap into the DRC market by setting up a subsidiary in the large commercial city of Lubumbashi in south-east DRC, near the Zambian border.