Equity Bank ready to take on Uganda

Equity came in and targeted the low end of the market - a strategy that is now being adopted by other banks (including multinationals that had closed branches in rural parts of Kenya). It reduced required balances and customers could open accounts with as little as KSh500 (R62.50). Clients could also get credit/loans even as little as KSh1,000 (R125). The queues grew longer by the day as customers flooded the “common man's” bank that was offering affordable services.

Today it is Kenya's largest bank in terms of depositors, capitalisation and market capitalisation. Last year, it posted an impressive performance, announcing a pre-tax profit of KSh2.4bn, a 116% increase up from KSh1.1bn recorded in the same period the previous year. The massive growth was funded by a massive capital injection of KSh11bn and funding from Helios EB International, a strategic investor that bought into the bank last December.

Equity is now eyeing Uganda. Last week, the bank's shareholders gave a go-ahead to acquire Uganda Microfinance Limited (UML), a microfinance company in Uganda, effectively taking up 100% of the bank's share capital.

The move by the shareholders at the Bank's AGM follows the approval of the deal from the Bank of Uganda earlier last week. The Bank of Uganda under the Microfinance Deposit-taking Institutions Act, 2003, of the laws of Uganda agreed to the acquisition price of KSh1.66bn to be met through an allotment to the current owners of 8.067 million new ordinary shares of the Bank at a price of KSh206 per new ordinary share.

The approval by the Ugandan authority paved way for the Central Bank of Kenya under the banking Act and the Capital Markets Authority under the Capital Markets Act to give its verdict on the groundbreaking cross-border acquisition by the Kenya's leading bank in term's of market share and customer base.

The deal marks the first time an indigenous Kenyan financial institution has made a 100% acquisition of such magnitude in the region. Microfinance is the dominant microfinance institution in Uganda operating profitably with 26 branches and 14 offices.

Dr. James Mwangi, Equity's CEO, said since the massive investment by Helios EB International in 2007, the bank has been actively engaged in looking for opportunities for regional expansion. “The acquisition of UML was in line with the bank's expansion strategy, and provided an optimum entry point into the Ugandan market,” he said.

He says the bank envisages that the current micro finance business in Uganda is poised for exponential growth and the plan is to extend UML's offering into a full-scale commercial bank, subject to approval by the Bank of Uganda.

The acquisition comes at a time when the bank has begun an ambitious program to consolidate its current growth by opening new branches in the country, and expanding into the East African region.