The banking sector in Rwanda is about to experience an unprecedented fight to claim a larger share of the market.
Equity Bank’s proposed acquisition of Rwanda’s BPR is heating up the market and forcing market players to adjust their strategies to maintain their positions.
BPR’s CEO, Maurice Toroitich, told Taarifa that Equity is in the progress of finalizing discussions of its possible acquisition of BPR to form the second biggest Bank in Rwanda after Bank of Kigali.
Toroitich didn’t reveal the price at which Equity is proposing to acquir BPR, but sources aware of the deal told Taarifa that Equity Bank offered over $100 million for all of AtlasMara’s assets it has proposed to acquire in Rwanda, Tanzania, Zambia and Mozambique
Equity’s buyout of BPR is motivated by the complementarity of both banks.
BPR is the larger bank locally. It has a robust infrastructure and a bigger network than Equity Bank even though it is bigger and commanding a regional and global scale.
Equity Bank is also considered to be housing more advanced technology to offer than BPR does.
However, both banks share common roots. Their philosophy and purpose are the same too.
They both focus mainly on the poorer and more rural segments of the market.
It is thus a wise move to enter into an acquisition than step on each others toes.
Strategically, the acquisition also gives the new bank more muscle.Until today both BPR and Equity had to rely on syndicated loans with other banks to serve bigger clients. “If today a customer comes and asks for a $15million, we wouldn’t be able to offer it because we have cap of $10million,” says Toroitich.“We would have to syndicate, but once we merge, our capital base will become significantly bigger, it would become more efficient to do bigger transactions, we will be a significant number two bank much better than each one on its own,” he said.BPR’s balance sheet stands at $335million, with a $50million net worth or capital base and an annual return of 10% ($3million).According to Toroitich, this is not as great as other banks, but its growing from a very low base, with the aim of reaching a level of return of 20%.Market dynamics in Rwanda have not allowed for larger bottomlines, but this has largely been due to the inability of the players to expand blaming it on cost of operations.Rwanda like all markets, has its challenges and rewards, as an example, registering […]