‘Crown Jewel’ Congo to Help Drive Growth for Biggest Kenya Bank
(Bloomberg) -- Equity Group Holdings Plc expects its business in the Democratic Republic of Congo to drive future growth of Kenya’s biggest bank by market value.
After concluding an acquisition that formed the DRC’s second-biggest bank last year, the subsidiary’s deposits almost quadrupled and loans jumped 160%, according to Chief Executive Officer James Mwangi.
Leadership changes in the DRC and a rise in global commodity prices have boosted investor interest in the vast country, which produces most of the copper in Africa and cobalt in the world. China Molybdenum Co. plans to double the size of its giant copper-and-cobalt unit with a $2.5-billion investment, while Glencore Plc intends to reopen its mine in the country after idling it for two years.
“If there’s one country that this group most likely will be defined by, it is the DRC,” Mwangi said in an interview in the capital, Nairobi. “Those who call DRC the jewel on the crown, I agree with them.”
For this full-year, the lender expects its net loan-book to grow by about 30%, driven by businesses in its home market, and partly the DRC and Tanzania. Kenya has experienced the fastest recovery from the effects of the Covid-19 pandemic of the six markets the lender operates in.
“We have realized the Kenyan market has bounced back earlier” than the rest, Mwangi said. “But we’re seeing a lot of global interest in the Democratic Republic of Congo in terms of investment opportunities.”
In Tanzania, significant changes in policy will see easier issuance of work permits, which has been a major hurdle. The lender’s unit registered 27% growth in deposits and 32% in the loan book.
The bank’s board is still committed to returning 30% to 50% of net income in dividends at the end of the year after a two-year freeze, Mwangi said at an investor briefing Tuesday morning.
Retaining profits helped the lender build buffers, and as a result, Equity’s cash and cash equivalents soared 154% to 219.5 billion shillings ($2 billion) in the six months, while investments in government securities grew 46% to 315.5 billion shillings. This will enable Equity to quickly deploy loans to places such as the DRC, which is rapidly reforming its economy, and in Uganda, the East African nation on the cusp of oil production, Mwangi said.
For the first half, Equity’s net income almost doubled to 17.9 billion shillings, after it slashed loan loss provisions by 64% and grew lending income by 27%.
Equity’s shares have risen 7.5% in the past 5 days, and advanced 75% in the past 52 weeks, according to data compiled by Bloomberg. The stock is trading at 6.4 times its estimated earnings per share for the coming year.
“They have ticked all the positive boxes so far,” according to Churchill Ogutu, head of research at Nairobi-based Genghis Capital. “The stock’s price appreciation is on expected future earnings, which based on the numbers published signals a continuation of the earnings trend.”
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