KCB joins race of financing Sh3.5 trillion DRC deals


Trust Merchant Bank SA (TMB) CEO Oliver Meisenberg (left), KCB Group Chairman Andrew Wambari Kairu (centre) and Central Bank of Kenya Governor Patrick Njoroge  at the Nairobi Serena on December 19, 2022. PHOTO | DIANA NGILA | NMG

KCB has joined Equity Bank in the scramble for the financing of Sh3.5 trillion trade deals in the Democratic Republic of the Congo as the banking supremacy battle goes regional.

On Monday, KCB announced the completion of the acquisition of DRC’s Trust Merchant Bank SA (TMB) for a value estimated at more than Sh15 billion, giving the bank a toehold in the vast mineral-endowed central African country.

This even as KCB, which is listed at the Nairobi Securities Exchange (NSE), set its eyes on DRC’s multi-billion international trade that involves the export of sought-after rare earth minerals such as cobalt, lithium and copper.

“We are looking at trade finance as a big product to facilitate cross-border trading,” said KCB Chief Financial Officer Lawrence Kimathi.

According to MIT's data platform the Observatory of Economic Complexity (OEC), DRC exported goods worth Sh2.38 trillion while the resource-rich nation imports were valued at Sh1.08 trillion in 2020.

Mr Kimathi added that the acquisition will also help the lender to grow its loan book, noting that since it announced its deal with TMB it has received a pipeline of Sh28 billion in facilities from sectors such as energy, cement manufacturing and mining.

But it is in trade financing -- which is used to protect parties involved in cross-border trade against risks such as currency fluctuations, political instability, and issues of non-payment -- that KCB is eyeing.

Equity Bank, which made forays into DRC in 2015 through a buyout of ProCredit Bank before further increasing its market share in 2020 after acquiring Banque Commerciale du Congo (BCDC), reported that trade finance significantly helped grow its pipeline.

Equity, the region’s most profitable bank, announced in the first nine months of 2022, revenues from trade financing — where certain financial instruments and products are used to facilitate international trade and commerce — grew by 60 per cent to Sh3.9 billion in the first nine months in 2022 up from Sh2.5 billion.

This helped Equity to grow its non-funded income, which includes fees and commissions, in the third quarter of 2022 by 31 per cent compared to 26 per cent in a similar period last year.

“We can be excused and understood, hopefully, if we call ourselves the trade finance bank of the region,” said Equity Bank CEO James Mwangi during an investor briefing last month.

Some of the instruments used in trade finance include lending lines, letters of credit, factoring, export credit and insurance.

KCB’s foray into the mineral-rich DRC is aimed at exploiting the opportunities offered by the country’s heightened cross-border activities in the region.

In July, DRC officially joined the six-nation East Africa Community (EAC), adding its more than 90 million population market to the regional trading bloc.

This gave Kenya, which is the only country in the EAC that does not share a border with DRC, hope to increase trade with the country with local companies warming up to Kinshasa.

In addition to the core banking business of TMB, KCB reckons that the existence of an insurance subsidiary, Afrissur SA, will provide an opportunity for KCB to diversify its offerings in DRC’s insurance sector.

“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 stakeholders,” said KCB chief executive Paul Russo.

KCB reported a 20.9 per cent growth in net profit growth in the nine months ended September to Sh30.6 billion up from the Sh25.2 billion reported for the same period last year.

Equity’s profit after tax in the same period climbed 26.61 per cent to Sh33.35 billion, helped by higher income from lending and transactions.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.