On June 14, Equity Group Holdings Plc signed an acquisition deal to take over Compagnie Générale de Banque (Cogebanque) PLC Ltd in Rwanda.
Upon completion of the transaction, by end of this July, EGH will pay an aggregate cash consideration of Rwf54.68 billion (US$48.1 million) for a 91.93% controlling equity stake.
The acquisition of the fifth largest bank, and subsequent amalgamation of the business with that of Equity Group’s existing banking subsidiary in Rwanda, would position Equity Bank as the 2nd largest bank in Rwanda after the merger.
This will create a total combined assets market share of 18% and a deposits market share of 19% based on audited accounts as at 31st December 2022.
Shareholders, customers and members of the financial sector fraternity have lingering questions.
Which name will be kept? Will staff lose their jobs? What market size will the merger create? And so on and so forth.
Taarifa’s Chief Editor, Magnus Mazimpaka, spoke to Hannington Namara, the Managing Director of Equity Bank, for details.
Below are excerpts.
What was the motivation behind buying COGEBANQUE?
Namara: It is certainly a growth story. The combined entity would strongly support the development of the country particularly by opening up the bigger pipes, better service offering and would spur more innovation and expanded reach leveraging technology. We had to do it as we have always done, otherwise it would have cost us another couple of years, maybe five, maybe ten, to be where we want to be…but the acquisition is meant to deliver better results and quickly. We wanted to get there early and play the role we intend to play for the benefit of the citizens.
Initially, you pullled out, before government aquired majority of the shares. What was the cause?
Namara: We didn’t pull out. We waited for when the owners would be ready to engage.
According the numbers you have; how big are you now when you combine both?
Namara: I don’t have the latest but at the time when we are looking at them, it should have gotten us to 14-16% market share.
That makes you the second.
Namara: Most likely because I think currently the 2nd largest is around 16% market share.
And the customer base?
Namara: Whatever they have, it will be an addition to almost a million customers that we already have.
Most of their customers are conservative who have been with the bank for a decade and above, how do you reassure them?
Namara: Those ones should actually be happy that they taking a flight to safety, without any add-ons and when they land, they will land on the platform of excellent customer experience that will empower them to achieve their dreams from now going forward. They are also going to join a network of nineteen million customers other customers who are on that platform already across the region. We will facilitate them to do their business across the borders. They can move anywhere as they wish. But most importantly, the combined balance sheet will be used to fulfill the dreams of the our customers.
You know there is a scarcity of dollars, what is the advantage of having two brands.
Namara: We hope that it will also become easy but it is an issue of supply. This is probably the best time to reinforce efforts of increasing foreign exchange supply by growing and expanding the export sector. The coming together is is not to eat each other. There are many positive consequential effects which are good for everybody. The customers of both entities, staff and other stakeholders.
There have been two recent mergers and they experienced difficulties including fusing their innovations and staffing which brought problems including lawsuits. What will be your structure?
Namara: Let me give you an analogy. You find a vehicle that is running very well and you buy it, you invest in it. After you bought it, you take off the tires. Will that vehicle move at the speed it had when you bought it? So the thing of laying off staff is a perception, I would say, because Equity operates at a very different model of productivity. I don’t know what it is COGEBANQUE because we have not looked at it, but I presume they are also a private entity, they were running around the same models. First of all, the two entities are profitable, they were doing ok. It means every staff have a role to play and to contribute to that profitability.
The two entities have enormous synergies. A combined entity will no doubt bring about better productivity.
Why, for example, would anybody looking at the impact they would bring, fire the staff who will then be the people to rely on to champion the vision? We are looking at it as a growth story rather than an optimization or cutting the costs.
Cost cutting, optimization is a lazy decision by the way. It works for nobody.
After a complete acquisition, which name will you retain; COGEBANQUE or Equity Bank?
Namara: We will assess at that point which one is a logical option. In all we shall do, we will keep all our stakeholders informed.
