By Jevans Nyabiage
As Kenyans struggled to make ends meet on the face of high inflation and volatile shilling last year, the banking industry was the biggest beneficiary.
Top commercial banks and the industry regulator, the Central Bank of Kenya (CBK) reaped from foreign currency swings to report healthy profits, as other sectors of the economy remained depressed.
Even before the shilling crisis was felt, the CBK registered total income of Sh49.5 billion for the year ending June 2011. This consisted of Sh9.2 billion from ordinary operations, unrealised foreign currency revaluation gains amounting to Sh38.9 billion and Sh1.4 billion from revaluation of fixed assets.
During the same year, CBKâs total expenditure amounting to Sh8.6 billion was recorded. The bank of last resort recorded a net surplus of Sh40.9 billion. The revaluation gains reversed Sh1.6 billion deficit CBK reported the previous year.
"The foreign currency revaluation gains were accumulated as the shilling heavily lost value against major convertible currencies particularly towards the end of the year compared to the closing position as at June 30, 2010," the bank says in its Annual Financial Report.
These figures, however, do not reflect the full extent of depreciation of the currency, which dropped to an all-time-low of Sh107 to the dollar on October 11, last year.
CBKâs Sh39.5 billion profit was realised from foreign currency revaluation as shown in its annual report. This profit is a negative, non-cash effects from foreign currency translation.
But the billion shilling question is why CBK held back this forex reserve when the economy was experiencing serious dollar shortfall whose effect saw the shilling fall to a historic low of Sh107 in October?
Was CBK guilty of currency speculation to make a kill?
Despite surplus, CBK said it would not pay dividends to the Government unlike in 2010 when it paid out Sh2 billion, even after recording losses of Sh1.6 billion.
According to CBK data, in the 11 months to November last year, banks made pre-tax profit of Sh80 billion, beating the Sh74.2 billion recorded in 2010.