Equity Bank might do better in Congo as part of its Africa expansion plan

East Africa’s Equity Bank is set to expand its footprints across Africa as it plans to acquire the second-largest lender in the Democratic Republic of Congo, Banqué Commerciale du Congo (BCDC).  

 “The proposed transaction is an opportunity for Equity Group Holdings (EGH) to deliver the vision of building sub-Saharan Africa’s premier financial institution through delivering innovative products and services to customers, including, in particular, the effective use of technology,” the company said in a statement.

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 also said.

Although the price of the deal was not disclosed, if completed the deal will make Equity Congo’s biggest bank after Rawbank Sarl, since the bank already has branches in the country. In 2015, Equity bank acquired majority stakes in Congo’s seventh-biggest bank, ProCredit Bank Congo in a deal worth $60 million. Meanwhile in March, the Chief Executive Officer of Equity Bank, James Mwangi said that it has grown the bank to 60 billion shillings ($578 million). In April this year, it agreed to buy Atlas Mara’s banking operations in Rwanda, Zambia, Mozambique and Tanzania, in a deal worth about $106m. 

Faith Mwangi, a senior investment analyst at Tellimer Markets Inc, told Bloomberg that the move to Congo, which has a higher margin environment compared to Kenya, is positive because Congo is a market that is under-penetrated and with high margins. “The opportunity in Congo is clearer. They have already had success in that market considering the ProCredit acquisition,” she said further.

This comes a week after rating agency, Moody’s said that  banks in Congo face “very difficult credit conditions as a result of high credit concentration, rapid credit growth and dollar-denominated lending.”