Equity Centre. The Kenyan-based bank has developed cold feet on increasing its presence in Zambia and Mozambique markets. FILE PHOTO | NMG Equity had hoped to acquire four loss-making banks from Atlas Mara at a discount and with no money changing hands.
Equity dropped Zimbabwe due to deep economic crisis including a volatile exchange rate and hyperinflation.
Only Rwanda offers positive prospects considering its subsidiary in the country is profitable.
In Tanzania, its subsidiary posted a $5.4 million loss and the bank has repeatedly been forced to inject additional capital.
In Zambia, a fragile economy is causing apprehension that Equity Group could be walking into another tough market akin to Tanzania.
A proposed transaction between regional lender Equity Group Holding and Atlas Mara Ltd (ATMA) has collapsed after the parties failed to reach an agreement on the valuation of four banks in Zambia, Mozambique, Tanzania and Rwanda.
“The new development on the ATMA transaction has everything to do with valuation and realities on these markets,” said a market analyst who requested anonymity due to close working relations with Equity Bank.
The realisation that it could be walking into a costly deal has prompted Equity Group to rethink its plans to enter the Zambian and Mozambique markets, both grappling with a challenging macroeconomic environment.
The Kenyan-based bank has also developed cold feet on increasing its presence in the Tanzanian market where its subsidiary has been on a losing making spree and where it was fined $256,350 for flouting anti-money laundering regulations.
The EastAfrican has learnt that following a due diligence on ATMA operations in the four markets, the bank is no longer convinced that actualising the deal will be viable in the long term.
Equity had hoped to acquire the loss-making banks from the London-listed firm at a discount and with no money changing hands.Although originally entering Zimbabwe with a takeover of ABCZim was part of the plans, Equity dropped Zimbabwe due to deep economic crisis including a volatile exchange rate and hyperinflation.Of the four markets in the transaction, Equity has realised that only Rwanda offers positive prospects considering its subsidiary in the country is profitable after returning a $6.6 million profit for the period ending September 2019, up from $4.6 million over same period in 2018.In Tanzania where Equity Group entered in 2014, its subsidiary posted a $5.4 million loss and the bank has repeatedly been forced to inject additional capital including $10 […]