Kenyan banks in South Sudan most profitable despite turmoil, says CBK

South Sudanese government soldiers in operation. Business potential in the youngest nation remains good despite the volatile political environment.

NAIROBI: Kenyan banks got more money from subsidiaries in South Sudan than elsewhere despite the challenging business environment.

Data compiled by Central Bank of Kenya (CBK) shows subsidiaries operating in South Sudan accounted for 33 per cent of the total profits, although only three banks have operations there.

This means that of the Sh8.4 billion profit before tax that banks got from subsidiaries in Uganda, Tanzania, Burundi, Rwanda and South Sudan, about Sh2.8 billion was realised from South Sudan.

This, according to CBK, demonstrates good business potential in South Sudan despite the volatile political environment that has made the business situation tough.

Tanzania, which has attracted seven banks with a branch network of 96, accounted for 26.9 per cent (Sh2.3 billion) of the gross profit from subsidiaries. Rwanda, which has four Kenyans banks running 55 branches, only made only Sh1.8 billion.

CBK data further shows three subsidiaries registered losses in various countries in the region compared to four in the previous year.

Two of the subsidiaries that registered losses before tax were operating in Uganda, indicating stiff competition though one of them had the subsidiary set up in 2013 and is therefore still new to the market.

“The third loss-making subsidiary is in Tanzania,” said CBK in its report.

But despite the profitability in South Sudan, assets held by subsidiaries of Kenyan banks in South Sudan declined by half from Sh117.7 billion in 2014 to Sh58.8 billion in 2015. This was mainly due to a dip in the value of South Sudanese Pound.

In mid-December, South Sudan government devalued the currency by 84 per cent as the government allowed the pound to trade freely.

This had a huge impact on Kenyan banks since the accounting rules dictate that all figures be translated from foreign currencies to the currencies of the operating country, Kenya.

As a result, total assets of subsidiaries stood at Sh413.2 billion compared to Sh419.3 billion that was recorded in the previous year. Tanzania contributed 38.6 per cent of the total assets, while Uganda’s share was 29.7 per cent.

Subsidiaries operating in Burundi accounted for 16.1per cent of the total assets while South Sudan took the least share (13.8 per cent) of the total assets.

“This reduced the asset contribution of Kenyan banks in South Sudan compared to all cross-border operations from 25.2 per cent in 2014 to 13.8 per cent in 2015,” said CBK report.

Subsidiaries booked Sh347.8 billion in gross deposits compared to Sh319.7 billion the previous year, translating to an increase of 8.7 per cent.

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