Dar investors acquire 51pc stake in Kenyan bank

A group of Tanzanian investors has acquired a majority stake in a Kenyan bank in the first significant entry of Dar into the competitive local banking space.

A disclosure note by lawyers Coulson Harney revealed the identity of investors behind M Holdings, who received a go-ahead from the Competition Authority of Kenya (CAK) to acquire 51 per cent of Oriental Bank, as shareholders of Bank M Tanzania.

“Acquisition of controlling stake in Oriental Commercial Bank Ltd by M holdings Ltd, owned by various shareholders of Bank M Tanzania,” read a list of transactions facilitated by Coulson Harney Advocates.

Bank M, ranked among the top 10 banks in Tanzania, is owned by 15 shareholders with Vimal Mehta as its largest shareholder with a 16 per cent share. Mr Mehta is the chairman of Negus group of companies which formerly held a controlling stake in Serengeti Breweries. Nine of its shareholders are listed as individuals with the rest institutions.

The Tanzanian lender was formed in February 2007 and focuses mainly on corporate and investment banking.

“The five-year composite business plan of Bank M envisages it’s growth organically as well through acquisitions within Tanzania and in the promising neighbouring countries like Uganda, Zambia, Rwanda etc: and its eventual emergence as a leading regional bank in sub-Saharan Africa,” notes the bank in its website.

Last year, the bank grew its profit by a quarter to approximately Sh663 million (TSh13.8 billion), riding on the rise in income from fees and commissions while keeping a tight lid on expenses.

Oriental Commercial Bank, whose shareholders had declared willingness to invite strategic investors to help with its expansion plans, is classified as a small lender by the Central Bank of Kenya. It was formerly Delphis formed from the ashes of BCCI.

Its profits last year dropped 49 per cent to Sh72 million, weighed down by higher interest expenses and reduced income from transactions. During last year’s general meeting, Oriental Bank declared plans to issue new shares to accommodate new investors seeking equity in the company.

READ: Oriental’s profit drops

The lender planned to create 50 million new shares worth Sh1 billion. The size of the transaction was not disclosed.

CAK approved the transaction in March this year, setting the stage for major change in shareholding at Oriental, which as Delphis emerged from statutory management in 2002 with new owners. It had collapsed in June 2001.

This is the latest deal as lenders seek to boost capital. Last year, Mwalimu Sacco bought a 51 per cent stake in Equatorial Commercial Bank for Sh1 billion with a capital injection of Sh600 million.

Equatorial Commercial Bank has recorded mixed performances in the last five years, sinking back in the red last year.

Previouly, there was no Tanzanian-owned bank operating in Kenya. Seven Kenyan banks operate in Tanzania:Equity, KCB, NIC, CBA, I&M, Bank of Africa and Diamond Trust Bank.

Tanzania has been a difficult market for most of the lenders, denying them brisk profit growth as recorded in other regional markets.

The market is, however, said to have a higher potential than Kenya, given its huge unbanked population.