Uganda’s Centenary Group purchases Malawi Bank, eyes more foreign expansion

By Musinguzi Blanshe
Posted on Wednesday, 26 October 2022 18:09

Centenary Bank

Centenary Group, the holding company of Centenary Bank, Uganda’s second largest bank, has made its first foreign acquisition of a financial entity by the purchase of MyBucks, a bank incorporated in Malawi. The group is eying more expansion to South Sudan and Democratic Republic of Congo. 

The group, together with the Catholic Archdiocese of Lilongwe, will acquire 100% stakes in MyBucks Banking Corporation of Malawi, whose proprietor MyBucks S.A. was placed into bankruptcy in December 2021.

Centenary Bank, owned by the Catholic Church, is the only indigenous financial institution among top tier banks in Uganda, coming second to Stanbic Bank of South Africa’s Standard Group. At the end of 2021, the bank’s assets were worth USh4.8trn ($1.26bn). The bank recorded profit of USh211.5bn in 2021, a 31% increase from the previous year.

After years of success in Uganda, Ddumba Ssentamu, the executive chairman of Centenary Group, tells The Africa Report that “the shareholders thought it’s high time we go beyond the boundaries of Uganda” and the opportunity presented itself when the group was approached by the Archdiocese of Lilongwe, who informed them that the bank that was on the market.

Ddumba says Centenary Group didn’t hesitate to start an engagement and the acquisition will “give Centenary Bank an international image”.

Andrew Muhimbise, an analyst based in Kampala, tells The Africa Report that Centenary will become “a multinational banking group” if it succeeds. He says Centenary’s growth momentum has been slowing down, which might have prompted it to make this venture. “Maybe buying a bank is good for management to show that there is growth,” he says.

‘Double-edged sword’

The Catholic Archdiocese of Lilongwe could be a double edged sword, Muhimbise argues. It will bring customers, but it’s also an investor with no banking sector experience. “They will have to contend with Catholic Church decisions and interests as a shareholder without banking experience,” he says.

Muhimbise says Centenary Bank has also been facing cut-throat competition from Equity Bank, which is taking a slice of its traditional customers – ordinary Ugandans – through agency banking. He warns that the acquisition could be fraught given the challenges experienced by other banks in the regions that have been acquiring other financial institutions.

Uganda is littered with such examples. DFCU Bank has been struggling following acquisition of Crane Bank Limited in 2017. Crane Bank also struggled after acquiring other local banks and Equity Bank had to completely reform a microfinance institution it bought in Uganda in 2018.

Ddumba didn’t divulge the acquisition saying the process is still ongoing. The figure, he says, will be disclosed after the purchase agreement is signed. However, MyBucks assets were worth 122 billion Malawi Kwacha (estimated to be $120m). Thus, the deal could be worth about $120m going by assets value.

MyBucks is a financial institution that has been in expansion overdrive since its establishment. It was incorporated in 2015 as the New Finance Bank. MyBucks S.A acquired 50% of New Finance Bank in 2017. New Finance Bank acquired Pride Malawi, a microfinance bank in 2018.

In 2019, MyBucks S.A acquired 100% of New Finance Bank, merged it with GetBucks – a microfinance company it owned – and rebranded to MyBucks Banking Corporation. The bank acquired Nedbank Malawi in 2020.

Restructuring

Ddumba says MyBucks Malawi will be rebranded Centenary Bank Malawi. “We already have a new name,” he says. The bank will be modelled to operate like a microfinance institution, the same Centenary Bank started in Uganda almost four decades ago. Its focus will be extending banking to the rural communities bringing into the banking fold 60% of Malawi population, which is unbanked.

The model we are going to use is microfinance. We are going to go to rural areas

He says micro-finance experts to restructure and rebrand the bank will be brought from Uganda. “The model we are going to use is microfinance. We are going to go to rural areas,” he says. “This bank has a number of branches throughout the country. We are going to change management and I am sure things will turn around.”

South Sudan, DRC

Ddumba says the group is also exploring opportunities for expansion to South Sudan and the DRC, the newest member of the East African Community. The group officials visited South Sudan months ago to “make connections”, he says.

Banking has been identified as some of the service sector opportunities in the DRC that Ugandans can tap into, says Odrek Rwabwogo, the presidential advisor on special duties, who also sits on the Presidential Advisory Committee on Exports and Industrial Development (PACEID).

When the bank enters the DRC market, it will be facing stiff competition from Kenya’s more established banks. In August, KCB Group, the holding company of Kenya Commercial Bank (KCB), with assets worth $6.9bn at the end of 2021, acquired Trust Merchant Bank (TMB), whose assets were worth $1.1bn in 2020. As per the agreement, KCB owns 85% stake in the bank.

Before KCB ventured into DRC, Equity Group Holdings, East Africa’s largest banking group, was already there: Equity acquired 86% stake in ProCredit between 2015 and 2017. In August 2020 Equity acquired 66.53% stake in Banque Commerciale Du Congo (BCDC), DRC’s second-largest lender by assets.

Instead of jumping East Africa entirely, Muhimbise says, Centenary Group should have tried DRC first. “I think they should have gone to Congo where [the] majority of the population are Catholics. We have seen Equity and KCB buying into Congo,” he says.

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