The Democratic Republic of Congo (DRC) has overtaken Rwanda as the most profitable market for subsidiaries of Kenyan banks within the East African Community bloc, highlighting the opportunities in the mineral-rich Central African nation.
The latest disclosures by the Central Bank of Kenya (CBK) show that the pre-tax profit realised by regional subsidiaries of Kenyan banks more than doubled to Sh66.13 billion in 2023 from Sh32.51 billion in 2022. The DRC market contributed the highest proportion of the total earnings by Kenyan banks’ regional subsidiaries, equivalent to 45.52 percent (Sh30 billion).
Subsidiaries operating in Rwanda and Uganda contributed 20.89 percent and 13.45 percent of the total profits respectively while units in Tanzania contributed 8.53 percent of the total profits.
According to CBK, Kenyan bank subsidiaries operating in South Sudan, Mauritius, and Burundi were the least profitable contributing 6.67 percent, 3.40 percent, and 1.56 percent of the total profits, respectively.
“One subsidiary operating in Uganda reported a loss of Sh25.4 million,” CBK’s Bank Supervision Annual Report (2023) reads.
In terms of loans, the gross loans for the regional subsidiaries increased by 52.2 percent to Sh1.1 trillion in 2023 from Sh725.8 billion in 2022.
The Congolese subsidiaries recorded the highest level of gross loans at Sh402 billion, accounting for 36.4 percent of gross loans in all the subsidiaries outside Kenya.
They were followed by subsidiaries operating in Tanzania which accounted for 18.6 percent of the gross loans while Rwanda and Uganda accounted for 17.4 percent and 16.1 percent of the gross loans respectively.
Mauritius recorded loans of Sh102 billion, accounting for 9.3 percent of gross loans.
Equity and KCB groups’ subsidiaries in DRC— Banque Commerciale Du Congo (EquityBCDC) and Trust Merchant Bank (TMB) — accounted for the lion’s share of the total subsidiaries’ assets and deposits in the DRC.
The combined deposit base of Kenyan bank subsidiaries increased by 42.18 percent to Sh1.82 trillion in 2023 from Sh1.28 trillion in 2022, with the main contributor of deposits—EquityBCDC—accounting for 28 percent (Sh504 billion) of the total deposits.
It was followed by KCB’s Trust Merchant Bank with total deposits of Sh251 billion (14 percent of total deposits).
The total assets of Kenyan subsidiaries in the region increased by 43 percent to Sh2.31 trillion in 2023 from Sh1.61 trillion in 2022, with a significant contributor to the asset base being EquityBCDC with total assets of Sh622 billion and KCB‘s Trust Merchant Bank with the total assets of Sh288 billion.
The Rwandan market has been Kenya’s profitable banking market from 2017 to 2022 while Tanzania and South Sudan topped the earnings list in 2016 and 2015 respectively, according to CBK data.
Kenyan banks first entered the more than 105 million Congolese banking market in 2016 when Equity Group acquired a 86.6 percent stake in a German bank ProCredit between 2015 and 2017 and renamed the subsidiary Equity Bank Congo (EBC) S.A.
Equity Group further acquired a 66.53 percent stake in another Congolese lender Banque Commerciale Du Congo (BCDC), Kinshasa’s second-largest lender by assets, in August 2022 and merged the two subsidiaries to form a new bank named EquityBCDC.
Equity was later followed by KCB group which entered the market through the acquisition of 85 percent stake in the Congolese Trust Merchant Bank (TMB) in December 2022.
The scramble for the DRC market amongst the region’s big banks deepened after Kinshasa joined the EAC bloc in 2022.
Besides Equity's entry into the DRC, Tanzania’s largest retail bank by assets CRDB also set up a subsidiary in the large commercial city of Lubumbashi in south-east DRC, near the Zambian border in 2023.
In 2021, KCB acquired a 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 an additional 14.61 percent of the shares from the minority shareholders.
Equity group’s net profit grew by 25.1 percent to Ksh15.39 billion in the three months to March 31, 2024, with 28 percent of the overall net group's earnings coming from DRC (Equity BCDC) followed by Equity Bank South Sudan (14.29 percent), Equity bank Rwanda (8.44 percent), Equity bank Uganda (5.84 percent), and Equity bank Tanzania (0.64 percent).
Equity BCDC recorded a 28 percent growth in net profit to Sh4.3 billion, Uganda posted a two percent rise in net profit to Sh900 million, while the Tanzanian subsidiary succumbed to a 51 percent decline in net profit to Sh100 million.
