I&M Holdings targets Uganda bank acquisition

I&M Bank Nyeri branch. The bank plans to join other Kenyan banks with presence in Uganda in race to boost its regional market share. Photo/Joseph Kanyi
I&M Bank Nyeri branch. The bank plans to join other Kenyan banks with presence in Uganda in race to boost its regional market share. Photo/Joseph Kanyi 

I&M Holdings is eyeing an acquisition in Uganda’s banking sector to complete its presence in East Africa’s economies.

The company, which owns I&M Bank, already has operations in Kenya, Rwanda, Tanzania, and Mauritius.

“We are looking at an acquisition opportunity in Uganda as we expand in the region,” said Gauri Gupta, the head of I&M’s corporate and strategic planning.

Other Kenyan banks with a regional presence include DTB, KCB, Equity, and Co-op Bank that have expanded in East Africa to grow their earnings and reduce reliance on the Kenyan market.

Ms Gupta said that I&M is willing to start operations from scratch should an acquisition fail to materialise. The lender plans to use various sources of cash to fund the expansion into Uganda depending on the capital outlay required.


Ms Gupta said issuance of new debt or rights issue are also options on the table. The Nairobi Securities Exchange-listed-firm said in its latest annual report that the Sh10 billion worth of bonds — to be issued over three years — would be partly used to finance its expansion plans.

I&M raised a total of Sh3.6 billion in the first tranche of the debt security in December, with the remaining Sh6.4 billion set to be raised by next year. Some of the cash will also be issued to boost the capital adequacy ratios of its banking units.

If I&M launches a rights issue, it will be the first time the company will be using such an instrument since listing on the NSE in June last year.

The holding company emerged from the reverse takeover of publicly traded investment firm City Trust by I&M Bank that was held privately.

New investments, including the upcoming Uganda subsidiary, will now be made under the holding company whose current portfolio is composed entirely of I&M Bank’s pre-existing operations.

I&M Holdings’ move underlines the growing quest among local lenders for a bigger presence in the regional market where uptake of financial services is lower than Kenya.

This signals significant growth opportunities in the countries such as Uganda, Rwanda and Burundi that have fewer banks compared to Kenya’s 43 lenders.

There are 26 banks operating in Uganda, including subsidiaries of KCB, Equity, and DTB.

The new markets have also grown at higher rates, highlighting their attraction to local lenders that have raised billions of shillings from shareholders and strategic investors to fuel their outward growth.

The economies of Uganda, Tanzania, and Rwanda, for instance, are projected to grow 6.6, 7.4, and 7.5 per cent respectively this year, according to projections by the World Bank.

In Uganda, I&M will be joining the fight for a larger share of a growing market where the uptake of formal financial services stands at 54 per cent, according to Uganda’s central bank.

The country is set to amend its banking laws to allow the introduction of agency banking, Islamic banking, and mobile money, a move that is expected to significantly boost access to financial services.

I&M says all its regional units are profitable, with Rwanda making the biggest contribution in the year ended December with a net profit of Sh581.6 million.
Overall, the holding company’s net profit rose by a fifth to Sh4.9 billion in the period.

Its share price has gained 14 per cent over the past six months to trade at Sh128 or 37.6 per cent above the introductory price of Sh93.