Equity and KCB must sell stakes of at least 30 percent each in their subsidiaries in the Democratic Republic of Congo (DRC), which may dampen the banks’ ambition to reduce reliance on the Kenya operations.
The DRC’s central bank —Banque Centrale du Congo (BCC)—requires banks operating in the Central African nation to have at least four unrelated shareholders, including current owners, to hold a minimum stake of 15 percent each by the end of 2026 to spread risks.
Local shareholders must also own at least 45 percent, prompting one of the largest deal-makings in the region.
The directive, known as Instruction 18, means that Kenya’s two biggest lenders, Equity Group Holdings and KCB Group Plc, must sell significant stakes within the next 20 months to comply.
Both banks own 85 percent stakes in their DRC subsidiaries and must therefore cede at least 30 percent to meet the BCC’s demands. Equity and KCB did not respond to requests for comments.
The DRC is one of the biggest countries on the continent by land mass and has more than 90 million people, making it appealing to ambitious banks looking for growth in the continent.
It has emerged as the most profitable foreign market for the Kenyan banks, posting higher profits compared to Uganda, South Sudan, Tanzania and Rwanda.
Equity BCDC posted a 29 percent rise in net profit last year to Sh15.6 billion while its asset base stood at Sh656.5 billion.
KCB’s TMB posted a Sh10.4 billion net profit in 2024 from Sh8.1 billion a year earlier.
Equity and KCB posted Sh0.6 billion and Sh1.1 billion profits in Uganda respectively.
Both view DRC subsidiaries as foreign units that would diversify their profits and cut reliance on Kenya.
This performance saw Equity CEO James Mwangi earlier hint that the bank could move its headquarters to the DRC.
The local ownership requirement is at the centre of delays in the buyout of the National Bank of Kenya (NBK) by Lagos-headquartered Access Bank.
The Central Bank of Nigeria (CBN) has demanded that Access Bank meet the new ownership requirement in the DRC before closing its purchase of NBK from KCB Group.
“We are fully aligned with the regulatory requirements established by the Central Bank of Congo (BCC), which stipulate that all banks in the country must have a minimum of 45 percent local or minority shareholding,” Access Bank told the Business Daily in emailed responses last week.
“This regulatory change affecting all financial institutions in the DRC is part of a broader drive to enhance local ownership and financial resilience. Access Bank is already in the process of complying with the new requirements.”
The DRC has become a lucrative landing spot for Africa-based banks looking for growth in the region and a foothold in the vast mineral-endowed central African country.
Equity was the first Kenyan bank to enter the DRC when it acquired an 86.6 percent stake in German Bank ProCredit between 2015 and 2017 before raising the share further to 94.3 percent.
In 2020, Equity acquired a 66.53 percent shareholding in Banque Commerciale du Congo (BCDC) from the family of businessman George Arthur Forrest and merged it with the continuing Equity Bank Congo (EBC) to form a new bank, Equity BCDC.
The wealthy Forrest family is known for the Groupe Forrest International, a company founded in 1922 with interests in construction, electricity, industry, mining services, agribusiness, health and welfare.
Equity raised its stake in the new outfit in 2023 to 85.4 percent, with the purchase of an extra 6.6 percent stake for Sh9.24 billion.
The deal valued the lender at Sh140 billion, signalling that the 30 percent stake that the bank must cede could be worth Sh42 billion.
The DRC subsidiary had a carrying value of Sh27.3 billion. But market value can be higher or lower than the carrying value at any time.
BCDC was majority-owned by the Forrest family at 66.53 percent, the government of DR Congo at 25.53 percent and minority shareholders at 7.94 percent.
Rival KCB marked its entrance into the DRC in December 2022 when it completed the acquisition of an 85 percent stake in Trust Merchant Bank SA (TMB).
KCB valued its shareholding in the bank, whose brand was retained as TMB, at Sh25.1 billion at the end of 2023.
KCB had previously indicated plans to acquire the remaining 15 percent stake in TMB by fully exiting founding shareholders — Robert Levy, who holds a 13 percent stake, Oliver Meisenberg (one percent) and the estate of Augustin Kabila Kisole (one percent).
The lender, at the time of acquisition, said it saw significant business opportunities from the purchase.
“We see significant business opportunities from this acquisition arising from delivering innovative financial services to customers, growing linkages between customers in our region and realising operational efficiencies which will deliver tangible value to key shareholders,” KCB Group Chief Executive Officer Paul Russo said.
The triple acquisitions by Equity (Pro-Credit/BCDC) and KCB (TMB) in the DRC have helped the two top Kenyan banks to an asset base of more than Sh1 trillion each, giving them the scale to become Pan-African lenders.
Equity said it expected the DRC market to continue growing, informed by continued growth in key sectors despite ongoing conflict in the East.
“Growth will be positively informed by mining activity, oil and gas and mining, foreign direct investments and regional infrastructure development,” Equity said in an investor presentation.
“Factors to watch include the conflict in the East, the suspension of US development assistance and weaker exports due to domestic policies, China’s slowdown and US tariffs.”
