Business Daily (Nairobi)
Emmanuel Were
27 January 2008
Lome-based EcoBank is to buy a 75 per cent stake in mortgage financier East African Building Society (EABS).
The deal, which basically implies a takeover of the Kenyan bank by the West African financial services giant, comes hot on the heels of last year's purchase of a 25 per cent stake of Equity Bank by UK-based Helios Capital in a Sh11 billion deal.
EABS shareholders' funds were valued at Sh1.57 billion last year and an acquisition of a 75 per cent stake means the deal could be worth more than Sh1.1 billion. The bank, which is one of Kenya's mid-tier players, has an asset base of Sh8.9 billion.
EcoBank's entry into Kenya is expected to intensify competition in the financial services market where recent acquisition deals have added muscle to previously small players.
EABS chief executive Raj Pal Arora said the partnership is in line with the bank's growth plans, which includes the widening of its product range. He said the range of new products would include bank assurance, Internet banking, and the offer of debit and credit cards.
EcoBank's control of a 75 per cent stake in EABS leaves the Pandit family - which is to date the single largest shareholder of the bank- with a 25 per cent stake and two seats on the board of directors.
The deal is particularly critical to EABS Bank whose core home loans business has come under serious attack by competitors over the last five years. EcoBank has vast experience in mortgage lending, gained through its pan-African operations.
It gives EABS the muscle to respond to its arch-rival, Housing Finance that strengthened its war-chest in the battle for the mortgage market when it sold a 24.9 per cent stake to Equity Bank (20 per cent) and British American Investments (4.9 per cent) for Sh600 million.
EcoBank on its part will be keen on pushing the deal through for a chance to strengthen its presence in East Africa. The bank is currently only present in Rwanda.
"Our vision is to become the largest bank in Africa and our entry into East Africa is part of that strategy," said Mr Michael Monari, EcoBank's Kenya country representative.
"We have been looking for a partner who can give us a strong footprint in Kenya - East Africa's financial hub - and we think that EABS Bank fits the bill," he said.
But even as the deal makers push for its conclusion, observers will be keen to know what impact ongoing political turmoil in Kenya will have on it.
Mr Monari, however, expressed EcoBank's confidence that Kenya would resolve the crisis and that the economy would survive.
"EcoBank has operated in some of Africa's toughest markets such as Liberia and we are therefore confident that our faith in Kenya is not misplaced," he said.
Incorporated in 1985, EcoBank Transnational Incorporated (ETI) is the parent company of the largest independent regional banking group in Africa. The EcoBank Group currently operates in 20 African countries, including Nigeria, Rwanda, and Ghana.
EABS Bank was formed in October, 2005, following the merger of East African Building Society and Akiba Bank.
The building society founded in 1959 by the late Mr Lalit Pandit, is one of Kenya's oldest and most successful building societies.
Akiba Bank Limited started out as Akiba Loans and Finance in 1972, and converted into a fully-fledged Commercial Bank in July, 1995.
Be the first to Write a Comment!
Copyright © 2008 Business Daily. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
