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.
Profit Surge in DRC
Latest data from the Central Bank of Kenya (CBK) shows that pre-tax profit realized in the DRC market by subsidiaries of Kenyan banks more than doubled to Ksh66.13 billion ($504.81 million) in 2023, up from Ksh32.51 billion ($248.17 million) in 2022. The DRC contributed the highest proportion of the total earnings by Kenyan banks’ regional subsidiaries, equivalent to 45.52 percent (Ksh30 billion or $229 million).
Comparative Profit Contributions
- Rwanda: 20.89 percent
- Uganda: 13.45 percent
- Tanzania: 8.53 percent
- South Sudan: 6.67 percent
- Mauritius: 3.40 percent
- Burundi: 1.56 percent
One subsidiary operating in Uganda reported a loss of Ksh25.4 million ($193,893), according to CBK’s Bank Supervision Annual Report (2023).
Gross Loans and Deposits
The gross loans for 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 recorded the highest level of gross loans at Ksh402 billion ($3.07 billion), accounting for 36.4 percent of gross loans in all subsidiaries outside Kenya.
In terms of deposits, the combined deposit base of Kenyan bank subsidiaries increased by 42.18 percent to Ksh1.82 trillion ($13.89 billion) in 2023. EquityBCDC, a merger of Equity Group’s subsidiaries in DRC, accounted for 28 percent (Ksh504 billion or $3.85 billion) of the total deposits, followed by KCB’s Trust Merchant Bank (TMB) with total deposits of Ksh251 billion ($1.92 billion).
Historical and Strategic Insights
Kenyan banks first entered the Congolese market in 2016 when Equity Group acquired an 86.6 percent stake in ProCredit, renaming it Equity Bank Congo (EBC) SA. In August 2022, Equity Group acquired a 66.53 percent stake in Banque Commerciale Du Congo (BCDC) and merged it with EBC to form EquityBCDC. Similarly, KCB Group entered the DRC market through the acquisition of an 85 percent stake in Trust Merchant Bank in December 2022.
The DRC market’s profitability has also drawn interest from Tanzania’s CRDB, which set up a subsidiary in Lubumbashi in 2023.
Performance Highlights
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 significant contributions from its regional subsidiaries:
- EquityBCDC: 28 percent of the group’s net earnings
- Equity Bank South Sudan: 14.29 percent
- Equity Bank Rwanda: 8.44 percent
- Equity Bank Uganda: 5.84 percent
- Equity Bank Tanzania: 0.64 percent
EquityBCDC recorded a 28 percent growth in net profit to Ksh4.3 billion ($32.82 million), while the Tanzanian subsidiary saw a 51 percent decline in net profit to Ksh100 million ($763,358).
Conclusion
The DRC’s emergence as the most profitable market for Kenyan banks within the EAC underscores the vast opportunities in the region. With significant investments and strategic acquisitions, Kenyan banks have positioned themselves to capitalize on the growth potential in the Congolese market, despite challenges in other East African markets.
