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CfC Stanbic profit dips as Juba forex crisis erodes Sh7bn

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The CFC Stanbic Bank branch on Kimathi Street in Nairobi. PHOTO | FILE

CfC Stanbic Bank has reported a 14 per cent dip in net profit largely attributed to lower non-interest income and a drop in earnings from its Juba subsidiary, where the lender suffered a Sh7 billion hit linked to devaluation of the South Sudan currency.

The Nairobi bourse-listed lender made a profit of Sh4.6 billion in the full-year to December 2015 compared to Sh5.4 billion a year earlier, blamed on decreased transactional income from the South Sudan business.

Juba’s balance sheet — when booked in Kenyan currency — contracted massively to Sh1 billion from Sh8 billion in December 2014 after the South Sudanese pound was devalued by 84 percent to match black market prices.

“The South Sudan environment to be honest actually continued to deteriorate. There are many challenges operating in South Sudan,” said CfC Stanbic Bank chief executive Philip Odera.

“There are opportunities but we have to treat them carefully,” he said at a media briefing in Nairobi on Wednesday, a day after Juba was admitted to the East African Community trading bloc.

CfC Stanbic entered South Sudan in April 2012 breaking even by the end of the year - after operating for eight months only – pointing to the then lucrative nature of the Juba banking market.

Factors such as civil unrest, uneasy relations with Sudan, plunging oil prices and devaluing of the local currency have however led to a downturn in fortunes from the South Sudan market.

READ: CfC Stanbic entangled in S.Sudan contractor’s ownership wrangles

Non-interest income – fees, commissions and forex trading – decreased by a tenth to Sh7.1 billion in December 2015, mostly due to lower volumes in Juba and a harsh trading environment in the Kenyan bond market.

CfC Stanbic saw net interest income grow by a tenth to Sh9.3 billion on the back of increased lending, where the loan book surged 15 per cent to hit Sh101.5 billion in the period.

The bank’s chief finance officer, Abraham Ongenge, said the foreign exchange loss arising from devaluation of the South Sudanese pound does not amount to a loss, hence the bank did not make any impairment provisions.

“Reduction in the balance sheet does not result in a loss. The market had anticipated the devaluation and we had protected our earnings,” said Mr Ongenge in an interview. “We don’t run a lending business in South Sudan. Most of our revenue is transactional,” he added.

The listed lender’s loan loss provisions increased by a quarter to Sh1 billion from Sh803 million in 2014 after gross non-performing loans grew by Sh1.5 billion to Sh4.8 billion. Mr Ongenge said the bank “had good collateral” to cover for the bad loans, and expressed optimism that the lender “should to recover most of it.”

With earnings dropping 14 per cent and forex woes in South Sudan, CfC Stanbic becomes the first lender to announce a dip in profits; and the second to suffer Juba currency devaluation stresses among the banks that have so far released full-year results for 2015.

Housing Finance posted the highest net profit growth of 23 per cent to hit Sh1.1 billion in the year ended December.

KCB Bank on Tuesday announced a 16.4 per cent growth in net profit to Sh19.6 billion, but booked a Sh6.1 billion foreign exchange loss mainly from its South Sudan operations.

NIC Bank’s net profit rose 8.9 per cent to Sh4.4 billion last year compared to Sh4.1 billion reported in the period to December 2014.