KCB Group PLC’s successful acquisition of 62.06 percent stake in Banque Populaire du Rwanda Plc (BPR) could trigger cutthroat competition among lenders.
The merger comes just after the National Bank of Rwanda on Tuesday launched a Web Comparator, an online portal and mobile App to enable consumers to compare prices of financial services offered by different service providers.
Analysts say the merger will stimulate stiff competition in the banking sector to not only reduce the cost of borrowing but also increase access to affordable financial services as the existing banks fight to retain and expand their market share.
On Friday this week, KCB Group announced that it had received regulatory approval from the National Bank of Rwanda (BNR) to merge its newly acquired Banque Populaire du Rwanda (BPR) and KCB Bank Rwanda.
The merger means the two banks will operate as a single entity named BPR Bank Rwanda Plc with KCB Group as the majority shareholder with effect from April 1.
“BPR Bank Rwanda PLC would like to inform the public that the amalgamation will not affect the products or services offered to BPR and KCB Bank PLC customers, instead a new entity will be able to support all its customers at a greater scale...” Said Maurice Toroitich, managing director in a statement issued on March 30.
The merger makes BPR Bank Rwanda PLC, the second largest bank after Bank of Kigali. Rwanda’s banking sector is currently composed of 611 institutions including 16 banks of which 11 are commercial banks. The financial sector remains highly concentrated as Banks account for about 67.2 percent of total financial sector assets, according to BNR, the country’s central bank.
The merger is expected to accelerate competition in the banking sector and expand financial inclusion. Foreign owned banks in Rwanda that are subsidiaries of mainly pan-African banking groups, held 46.7 percent of total banking sector assets.
As at December 2021, the largest 3 banks accounted for 49.9 percent of total assets of the banking sector compared to 49.0 percent as at end December 2020.
“BPR, as we know it today, has a lot of potential. The success of this business will build on our era of undisputed leadership in the market and contribute to Rwanda’s economic success journey. I am confident that we can rewrite Rwanda’s next chapter of development and economic growth,” said
KCB Group CEO and MD Joshua Oigara in a statement. Noticeable growth Specifically Rwanda’s banking assets grew by 17.5 percent to Rwf 5,064 billion in 2021, up from Rwf4,311 billion in 2020, mainly driven by growth of deposits, capital injections and profits according to the latest figures by BNR.
Figures by the central bank also show the banking sector remains profitable and profitability improved last year. The aggregate net profits of banks increased by 53.6 percent to Rwf 125.5 billion in 2021 from Rwf 81.7 billion in 2020, higher than the growth of 8.0 percent during the previous year.
For instance, Bank of Kigali PLC which remains the biggest local bank by assets reported a 35 percent increase in net profit to Rwf 51.9 billion for the year ended December 2021, driven by a 20.8 percent rise in total interest income and a double-digit growth in all key performance metrics.
“We recorded another strong performance in 2021, reflecting economic recovery with improved asset quality and profitability,” said the BK chief executive Dr Diane Karusisi while announcing the results.