Equity Bank Group and Atlas Mara Group have signed an agreement, which will see the former acquire 62 per cent of Banque Populaire du Rwanda Limited.
A letter to the Rwanda Stock Exchange by the bank seen by The New Times confirmed the development.
The agreement between the two entities allows for due diligence prior to confirmation.
The acquisition is also subject to approval by regulators, including the Central Bank.
The agreement will see Equity Bank spread its presence across the region by acquiring 100 per cent stake in three other banks owned by Atlas Mara.
Equity is seeking to fully acquire African Banking Corporation (ABC) in Zambia, Tanzania and Mozambique.
The move comes at a time when local banks are required to raise their minimum capital from the current Rwf5 billion to Rwf20 billion, according to a new licensing regulation for the sector.
This presents commercial banks a task to raise the capital fourfold which some had admitted is an uphill task and would lead to mergers and acquisition.
This is one of many acquisitions expected on the local banking scene as a result of the new regulation.
Rwanda currently has 16 commercial banks. The Chief Executive Officer of BPR, Maurice Toroitich, termed it as the beginning of a long process to conclude the deal.
He added that there were still many things to be done, which could delay the process until somewhere in 2020.
Toroitich sees the transaction as a good thing for the country’s financial market.
“The deal is very good for the market because once the two banks are combined, we shall have another strong bank in the market which will be able to do more than what each one of the banks can do on their own,” he said.
BPR is the a result of an investment of about $20.4 million (about Rwf15.4 billion) in Banque Populaire du Rwanda and a consequent merger with BRD Commercial Bank Ltd, previously part of Development Bank of Rwanda.
In April 2015, Atlas Mara Limited acquired minority shares in BPR and later in 2016 merged BPR with the commercial wing of the Development Bank of Rwanda (BRDC), that it had acquired in 2014 giving Atlas Mara the controlling stake of 62.1 per cent of shares in BPR.
The bank is among the largest players locally in regards to assets, customer base and branch network. As of 2018 December, assets stood at Rwf 274.6 billion with loans and advances making the largest contribution.
In 2018, the bank registered a profit of Rwf3.7 billion up from about Rwf1 billion in 2017. Cash and balances at the central bank stood at about Rwf28.8 billion.
Despite having a broad outreach, and asset base, the bank has not performed as well as many would expect with a section of experts pointing to lack of good market entry strategies.
Equity Bank has, on the other hand, been enjoying growth in the local market with 2018 profits amounting to Rwf5.97 billion, and with assets worth Rwf 233.1 billion.