I&M Holdings has invested Ksh819.9 million ($8.1 million) in acquiring an additional 15.35 per cent stake in its Tanzanian subsidiary through a series of transactions that included the buyout of French fund Proparco.
This raised the banking group's interest in the unit to 70.38 per cent from the previous 55.03 per cent, according to the Nairobi Securities Exchange-listed firm's latest annual report. Besides acquiring some shares from Proparco, I&M also participated in the subsidiary's rights issue in which it took up shares left by other minority investors.
"During the year, the group increased its shareholding in the subsidiary to 70.38 per cent up from 55.03 per cent held earlier following the exit of Proparco, which had reached the end of its investment horizon," said I&M chairman Daniel Ndonye in the statement.
The subsidiary undertook a $5 million rights issue to boost its capital position in the wake of economic challenges that affected the banking industry in that market.
I&M says the introduction of austerity measures last year greatly affected money circulation and reduced credit to the private sector.
The banking sector was also hit by the implementation of value-added tax on financial service charges "and a significant increase in the stressed assets in view of the tight liquidity position".
The unit secured a Ksh1.2 billion ($12 million) loan from Dutch development finance institution FMO and has accessed Ksh824 million ($8.2 million) of the amount for on-lending.
The subsidiary made a pre-tax profit of Ksh373 million ($8.2 million) in the year ended December, rising marginally from Ksh371 ($3.7 million) a year earlier. Its loan book increased 11 per cent to Ksh13.7 billion ($137 million) from Ksh12 billion ($120 million) in the same period while customer deposits grew four per cent to Ksh13.1 billion ($131 million) from Ksh12.6 billion ($126 million).
Increasing its interest in the Tanzanian unit is part of I&M's strategy of diversifying into the regional market.
"While Kenya remains the dominant player within the EAC region, we are witnessing increasing strong growth in the other EAC economies - Tanzania, Rwanda and Uganda, which further affirms our goal to be a regional bank," said Mr Ndonye.