DRC tops profit charts for Kenyan banks in EAC

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The Democratic Republic of Congo (DRC) has overtaken Rwanda as the most profitable market for subsidiaries of Kenyan banks within the East African Community (EAC), highlighting the opportunities in the mineral-rich Central African nation.

Latest data by the Central Bank of Kenya (CBK) shows that the pre-tax profit realised in the DRC market by subsidiaries of Kenyan banks more than doubled to Ksh66.13 billion ($504.81 million) in 2023, from Ksh32.51 billion ($248.17 million) in 2022.

The DRC market contributed the highest proportion of the total earnings by Kenyan banks’ regional subsidiaries, equivalent to 45.52 percent (Ksh30 billion -- $229 million).

Subsidiaries in Rwanda and Uganda contributed 20.89 percent and 13.45 percent of the total profits respectively, while subsidiaries in Tanzania contributed 8.53 percent.

According to CBK, subsidiaries 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 Ksh25.4 million ($193,893),” CBK’s Bank Supervision Annual Report (2023) saysRead: DRC now Kenya’s fastest-growing EAC export market.

Gross loansThe gross loans for the regional subsidiaries increased by 52.2 percent to Ksh1.1 trillion ($8.4 billion) in 2023, from Ksh725.8 billion ($5.54 billion) in 2022.

The Congolese subsidiaries of Kenyan banks recorded the highest level of gross loans at Ksh402 billion ($3.07 billion) accounting for 36.4 percent of gross loans in all the subsidiaries outside Kenya.

It was followed by subsidiaries in Tanzania, which accounted for 18.6 percent, Rwanda (17.4 percent) and Uganda (16.1 percent).

Mauritius recorded gross loans of Ksh102 billion ($778.63 million), accounting for 9.3 percent.

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 DRC.

It was followed by KCB’s TMB with total deposits of Ksh251 billion ($1.92 billion), representing 14 percent of the total deposits.

The total assets of Kenyan subsidiaries in the region increased by 43 percent to Ksh2.31 trillion ($17.63 billion) in 2023, from Ksh1.61 trillion ($12.29 billion) in 2022, with a significant contributor to the asset base being EquityBCDC, with total assets of Ksh622 billion ($4.75 billion), and KCB‘s Trust Merchant Bank, with the total assets of Ksh288 billion ($2.2 billion).

Banking marketThe Rwandan market was 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 Congolese banking market in 2016, when Equity Group acquired 86.6 percent stake in a German bank-ProCredit and renamed the subsidiary Equity Bank Congo (EBC) SA.

Equity Group then 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, EquityBCDCKCB Group entered the market through the acquisition of 85 percent stake in the Trust Merchant Bank in December 2022.

The scramble for the DRC market by the region’s big banks deepened after Kinshasa joined the EAC in 2022.

Tanzania’s largest retail bank by assets, CRDB, also set up a subsidiary in the large commercial city of Lubumbashi in southeast DRC, in 2023.

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

Equity Group’s net profit grew by 25.1 percent to Ksh15.39 billion ($117.48 million) in the three months to March 31, 2024, with 28 percent of the net group's earnings coming from EquityBCDC, 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).

EquityBCDC recorded a 28 percent growth in net profit to Ksh4.3 billion ($32.82 million), Uganda posted a two percent rise in net profit to Ksh900 million (6.87 million), while the Tanzanian subsidiary saw a 51 percent decline in net profit to Ksh100 million ($763,358).