DRC, a gem in every investor's portfolio

The DRC, a country well known for its mineral resources is turning out to be a very profitable market for financial services. Kenyan banks scrambled to have a presence in the market, this intensified after the nation formally joined the EAC. It was a head-scratcher for outsiders, who wondered why was there so much fomo around this new market. Well the numbers are out and it's clear as day why leaders at these firms deemed it mandatory to have a presence in the DRC market.

Kenyan banks have been expanding in the region for quite some time, taking advantage of the privileged access they get coming from an EAC member state. These new markets have proven vital for ambitious firms looking to grow and dominate in the region, the DRC was an opportunity for such firms. The visionary leader of Equity Group Mr. Mwangi saw this market's potential early on, buying a majority stake in ProCredit back in 2016. They later(in 2022) bought a majority stake in the 2nd largest lender by assets - Banque Commerciale Du Congo - and merged the 2 to form EquityBCDC. KCB Group followed suit by acquiring a majority stake in Trust Merchant Bank in 2022, this deal disrupted their business causing the bank to post unimpressive numbers in earnings for FY22. Other players in the region like Tanzania's CRDB have also setup shop in the country.

Recent data from the CBK shows that pre-tax profit from regional subsidiaries for Kenyan banks went up 103.4% from KES 32.51B to KES 66.13B. DRC alone contributed KES 30B, accounting for 45.4% of the pre-tax profits. Rwanda followed with KES 13.81B, find data on other subsidiaries here. Deposits in subsidiaries went up 42.18% YOY in 2023 to KES 1.82T, with deposits in DRC doubling to KES 755B. Currently, the two largest banks in Kenya have a presence in DRC. For clarity, the business for these 2 banks from DRC accounted for 45.4% of all regional subsidiaries' pre-tax profits. Check out Equity Group's pre-tax profit by market

Market	Pre-tax profit (KES Billion) - '23	Pre-tax profit (KES Billion) - '22
Kenya	39.364	65.005
DRC	18.638	8.117
Rwanda	5.719	4.028
S.Sudan	3.009	2.995
Uganda	1.295	2.395
Tanzania	.631	.470

It is evident that DRC is posting phenomenal numbers for Equity Group. And Equity is not the only one, other banks with a presence there have seen such numbers. KCB posted astounding numbers in Q1 '24(69% growth in net profit) after acquiring TMB in 2023, rest assured TMB played a role in these results. You can clearly see where the aggregated, in pre-tax, profit of KES 30B for the Kenyan banks from DRC is coming from.

Conclusion

So, is there still an opportunity to invest in the DRC? I think there still a lot of opportunity, especially in the financial services sector. The tremendous growth we've seen from the banks will eventually cool off and stabilize, however, there's still opportunity for other players since the financial services industry isn't a winner take all industry. The nation of roughly 105M people needs financial services just like any other country. KCB, Equity and NCBA are strategically positioned to offer the most value to the people of Congo by offering both banking and insurance services.
What I can't seem to comprehend is - why NCBA isn't in DRC yet? I should have a conversation with Mr. Gachora soon and find out why. Until then, I'll give them the benefit of the doubt and assume they've got something cooking.

Resources

Banking sector report - CBK , Equity Group finanicals , KCB Group financials Q1 '24