Bank subsidiaries record 31.5pc growth in profits

Kenyan banks registered a 31.52 percent increase in regional subsidiaries’ pre-tax profit to Sh11.57 billion last year supported by increased lending, offering hope for more growth opportunities across the borders.

The growth in profit from previous year’s Sh8.79 billion was specifically from subsidiaries in DR Congo, Tanzania, Burundi and Mauritius even as Uganda’s fortunes waned.

Rwanda emerged the most profitable market for Kenyan bank units in the region despite having fewer subsidiaries than Uganda and Tanzania.

Gross loans of subsidiaries stood at Sh305.7 billion, being Sh19.1 billion rise from previous year supported by increased lending by Bank One Mauritius, Equity Bank Uganda, Equity Bank Rwanda, Pro Credit Bank DR Congo and I & M Bank Rwanda. Central Bank of Kenya (CBK) data shows Rwanda had five subsidiaries with 56 branches in contrast with Uganda’s seven units with a branch count of 104. Tanzania had six subsidiaries with a network of 76 branches.

CBK data showed Rwanda subsidiaries accounted for Sh2.79 billion in profits, which was 24.12 percent of the total earnings. Subsidiaries in Tanzania accounted for 17.95 percent of the total profits while those in Uganda accounted for 16.71 percent. “Uganda topped the list of loss-making subsidiaries thus recording the lowest increase in profits. NIC Bank, Guaranty Trust Bank and ABC Bank in Uganda recorded a combined loss of Sh339.67 million,” said the banking regulator.

“The performance of Uganda subsidiaries was attributed to low business due to increased competition in a market dominated by established local players.”

However, the profitability of the units in South Sudan significantly improved in 2018. This was due to the peace initiatives and improvement in the macroeconomic environment that has seen political risks decline.

Kenyan banks had been cautiously optimistic of a lasting political solution in South Sudan.

A host of Kenyan banks including KCB #ticker:KCB, Equity #ticker:EQTY, Co-operative #ticker:COOP and Stanbic #ticker:CFC ventured into South Sudan following a peace deal in 2005, attracted by a large unbanked population and oil wealth.

Nine Kenyan banks had subsidiaries in the region, being same as the previous year. They are KCB, Diamond Trust Bank #ticker:DTK, Co-operative, Guaranty, Equity, I&M Bank #ticker:I&M, African Banking Corporation and the now merged NIC Bank and Commercial Bank of Africa — NCBA #ticker:NIC.