Kumaran Pather, the Orient Bank Managing Director and CEO
Kenya based I&M Holdings plans to acquire a 90 percent stake in Uganda’s Orient Bank Limited in a transaction in which it will spend more than KSh2 billion (UShs68.6bn), Business Daily reports.
The deal will add to its regional banking operations comprising Kenya, Rwanda, Tanzania and Mauritius.
The Nairobi Securities Exchange-listed firm had been eyeing the Ugandan market as early as 2014 in pursuit of growth and regional diversification strategy that is also seen among rivals like KCB Group , Equity Group and DTB Group .
“Shareholders of I&M Holdings Plc are advised that the company has on July 17, 2020 entered into an agreement with the shareholders of Orient Bank Limited for the sale and purchase of shares comprising 90 percent of the issued share capital of Orient Bank Limited,” I&M said in a notice.
“Further details of the transaction will be made available to the shareholders of the company in due course.”
Sources familiar with the matter told Business Daily that I&M aims to complete the transaction later this year and is expected to pay more than Sh2 billion for the controlling stake.
The deal is subject to regulatory approval from both Kenya and Uganda central banks and the Capital Markets Authority.
Orient Bank reported a net loss equivalent to KSh30.6 million (UShs1.05bn) in the year ended December 2019 when its shareholder funds or book value stood at KSh3.3 billion.
Orient Bank’s major shareholders include its vice chairman and founder Ketan Morjaria.
Mr Morjaria is also a founder and significant shareholder in Kenya’s Credit Bank that recently unsuccessfully tried to raise Sh1 billion of new capital from private equity firm Oikocredit International.
He has a 9.8 percent stake in Credit Bank, according to the lender’s latest available disclosures. His ownership in Orient Bank was not immediately clear.
“Mr Morjaria is a founder and board member of both Orient Bank and Credit Bank in Kenya, and a strategic shareholder in both institutions,” Orient Bank says in its latest available annual report.
I&M currently runs a corporate finance advisory business, I&M Burbidge Capital, in Uganda and acquisition of the bank will expand its operations in that market.
Other Kenyan banks with a regional presence include DTB, KCB, Equity that have expanded in Eastern Africa to grow their earnings and reduce reliance on the Kenyan market.
I&M’s move underlines the growing quest among local lenders for a bigger presence in the regional market where uptake of financial services is lower than Kenya.
This signal significant growth opportunities in the countries such as Uganda, Rwanda and Burundi that have fewer banks compared to Kenya’s 39 lenders. There are 24 banks operating in Uganda, including subsidiaries of KCB, Equity, and DTB.
About Orient Bank
Orient bank has been operating in Uganda since 1993. In November 2002, Orient Bank successfully out-competed other Banks in taking over TransAfrica Bank Ltd. The bank has failed post profits sustainably.
Orient Bank made a loss of UShs1.05bn in 2019, down from UShs5.55bn profit recorded in 2018.
This is after the bank’s Non-Performing Loans (NPLs) increased to UShs60bn from 14.8bn in 2018.
Headed by Kumaran Pather as Managing Director, Orient Bank saw its bad loans written off increase to UShs11.2bn in 2019, from 7.8bn in 2018.
Pather joined Orient Bank after Julius Kakeeto quit the bank late last year to join PostBank as its Managing Director.
The bank’s loans advanced to customers also reduced by about 8.56% to UShs305.50bn in 2019 from Shs334.10bn registered in 2018.
Additionally, the bank’s Core capital also reduced to UShs57.1bn in 2019, from UShs80.7bn recorded a year earlier.
However, the bank’s assets increased to UShs814.3bn in 2019, up from UShs749.85bn recorded a year earlier. Customer deposits also increased to Shs673.4bn in 2019 from UShs618bn in 2018.
