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By Bedah Mengo NAIROBI (Xinhua)
-- The conflict in South Sudan
and the closure of banks in the Kenyan market reduced
the footprint of East African nation’s financial
institutions across the region.
The East
African biggest economy saw the number of its banks
operating in the region reduce to nine in 2016 from 11
in 2015 as the number of branches fell by 36, new
Central Bank of Kenya data showed Tuesday.
The apex
bank’s data contained in its 2016 supervision report
indicated that the branches dropped from 333 in 2015 to
297, with the decline blamed on collapse of Imperial
Bank, which had subsidiaries in Uganda and Tanzania and
the closure of Bank of Africa which exited the Kenyan
market.
“The decline
of banks with regional subsidiaries was occasioned by
Imperial Bank Ltd and Bank of Africa Ltd. The Ugandan
subsidiary of Imperial Bank was sold in March 2016. Bank
of Africa (BOA) Uganda is currently 100 percent foreign
owned following the exit of BOA Kenya from the former’s
shareholding,” explained the Central Bank, adding Bank
of Africa also exited the Tanzania market where they had
25 branches in 2015.
Nine Kenyan
banks during the period under review had subsidiaries
operating in the East African Community (EAC) partner
states and South Sudan as compared to 11 in 2015.
These are
Kenya Commercial Bank (KCB) Holdings, Diamond Trust Bank
Kenya Ltd, Commercial Bank of Africa Ltd, Guaranty Trust
Bank Ltd, Equity Group Holdings Ltd, I&M Bank Ltd,
African Banking Corporation Ltd, NIC Bank Ltd and
Co-operative Bank of Kenya Ltd.
The bulk of
the branches are in Uganda (99), Tanzania (77) and
Rwanda (55), said the Central Bank.
Besides
having presence within the EAC Partner States, some of
the Kenyan banks such as I&M Bank, Ltd, Prime Bank and
Equity Group have expanded beyond the region.
I&M Bank has
50 percent shareholding in Bank One Limited in
Mauritius, Prime Bank (Kenya) Ltd has 11.24 percent
shareholding of First Merchant Bank in Malawi and 11.46
percent shareholding of Capital Bank of Botswana and
Equity Group acquired 79 percent ownership of ProCredit
Bank of Democratic Republic of Congo.
As at end of
2016, Equity Bank had five branches in the war-ravaged
South Sudan after closing seven of them because of a mix
of hyperinflation, a battered local currency and an
economic slowdown.
“Because of
uncertainty, and because of a lack of peace, we have
been forced to reduce those branches to five,” said
James Mwangi, Equity’s chief executive during a recent
shareholders’ meeting.
KCB, on the
other hand, had 17 branches in South Sudan after closing
two during the period in review.
The number
has, however, dropped further after the bank, the
biggest by assets, announced in May that it is closing
unspecified number of branches due to hyperinflation
which exposed it to 34 million U.S. dollars loss in
2016.
The
three-year civil war in South Sudan has considerably
cut, among other things the oil output, which is a major
source of foreign exchange, leading to a higher
inflation amid devaluation of the country’s currency.
However,
despite the reduction of branches, the number of
employees in the Kenyan banks rose to 6,223 in 2016
compared to 5,952 in 2015.
“Uganda had
the highest number of employees at 29.76 percent mainly
attributed to the country having the largest proportion
of branches in the region,” said the Central Bank.
Loans and
deposits in the branches rose marginally showing the
potential of the subsidiaries.
While gross
loans of subsidiaries were worth 2.3 billion dollars
from 2 billion dollars in 2015, deposits stood at 3.4
billon dollars from 3.3 billion dollars.
The
subsidiaries registered a total profit before tax of 85
million dollars in 2016 compared to 83 million dollars
the previous year.
“The
marginal rise in deposits, profit and loans is an
indication of two things, first is stiff competition
from local banks and second, the Kenyan banks are facing
other challenges beyond those within the business like
insecurity and volatility in South Sudan which creates
uncertainty in the market,” said Henry Wandera, an
economics lecturer in Nairobi. |
