Cogebanque acquisition propels Equity to number two bank in Rwanda
Regional lender Equity will leapfrog the ladder to become the second largest bank in Rwanda, after it completes the acquisition of a controlling stake in fifth-ranked Cogebanque. Equity announced the signing of a framework agreement under which it will acquire 91.93pc of the stock in Compagnie Générale de Banque (Cogebanque) in a deal valued at USD 48 million. The parties signed a binding term sheet agreement that commits Equity Group Holdings Limited to pay the sum upon completion of the transaction.
Equity Group also says intends to make an offer to the remaining shareholders to own 100pc of Cogebanque. The acquisition of Rwanda’s fifth largest bank, and subsequent integration of the business into Equity Group’s existing banking subsidiary in Rwanda, will propel Equity Bank into the 2nd largest bank in Rwanda. The combined entity will have a market share of 18pc and hold 19pc of deposits in Rwanda.
The transaction would solidify Equity Group’s systemic status in the region with the amalgamated Rwanda subsidiary joining Equity Bank Kenya and EquityBCDC in the Democratic Republic of Congo as banks with the second largest market share in their respective markets.
Government officials hailed the development. “Equity Group’s acquisition of Cogebanque reflects the trust and confidence placed in Rwanda’s economic prospects and the resilience of our financial industry. The consolidation of these two institutions will undoubtedly contribute to the growth and stability of Rwanda’s banking sector, enabling us to provide better financial services to our citizens and facilitate economic empowerment,” said Dr Uzziel Ndagijimana, Rwanda’s Minister of Finance and Economic Planning.
Dr James Mwangi, Group Managing Director and CEO, Equity Group Holdings Plc said, the acquisition was largely informed by Rwanda’s positive medium term economic outlook and unmet potential in the financial sector. Rwanda’s 5-year average GDP growth rate at 6.5pc ranks it amongst the 10 fastest growing countries in the world, he said.
“Rwanda’s economic growth is expected to be supported by a continued ease of doing business, recovery of global travel that will underpin its tourism and Meetings, Incentives, Conferences and Exhibitions (MICE) strategy targeting Foreign Direct Investments, regional integration, supporting trade and increasing contribution to its manufacturing sector. An underpenetrated financial services sector, with private sector credit and GDP being below 30pc provides a well-defined secular growth opportunity for the financial services Group,” he added.
The lender says Rwanda has been its highest return business, generating high growth and sustained efficient operations. The acquisition and amalgamation of Cogebanque is expected to shore-up Equity Rwanda’s economies of scale with a resulting 54pc growth in the balance sheet. The larger balance sheet with an enhanced single lending obligor limit will better support the financing needs and requirements of businesses in the high growth sectors further enhancing capacity for syndicated lending with other large banks in Rwanda to support economic growth of Rwanda as envisioned under Vision 2050 and facilitate growth in key sectors of Tourism, MICE and manufacturing.
Through combining Cogebanque’s existing network of 28 branches with that of Equity Rwanda, the combined bank will achieve countrywide distribution and coverage while acquiring and strengthening its Micro-, Small- and Medium-sized Enterprise (MSME) franchise, which is its core strength. The MSME segment of the Rwanda economy will greatly benefit from Equity’s strong product offering and innovative technology solutions for the segment.
“This acquisition and proposed amalgamation of Cogebanque with Equity Bank Rwanda will result in a strengthened National and Regional Commercial bank in line with, and underpinning Rwanda’s aspirations of being an international financial and business center. Strong Local, National and Regional commercial banks will be the foundation of such a regional and International Financial Services Center status”, said Dr. Mwangi