CfC converts Juba branch into subsidiary after half-year boost
CfC Stanbic Bank plans to convert its Juba branch into a fully owned subsidiary of the Kenyan unit. FILE
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CfC Stanbic’s January-to-June net profit surged by more than half partly owing to increased earnings from the South Sudan business.
CfC Stanbic Bank plans to convert its Juba branch into a fully owned subsidiary of the Kenyan unit in a bid to free it from a regulatory bind, the lender announced yesterday. As it is now, the Juba branch is subject to regulation by South Sudan, Kenya and South African central banks, making management decisions bureaucratic and slow.
CfC Stanbic’s January-to-June net profit surged by more than half partly owing to increased earnings from the South Sudan business.
“Transforming the Juba branch into a subsidiary makes it easier to seek regulatory approvals, increase our footprint and gain flexibility in funding the operations in South Sudan,” said Edwin Mucai, the project manager overseeing the restructuring.
The Nairobi bourse-listed lender said yesterday that earnings from the Juba branch accounted for a tenth of the Sh3.3 billion net profit reported in the six months to June compared to Sh2.2 billion in a similar period last year.
The top-tier bank is currently incorporating a subsidiary in South Sudan as a strategy to cut regulatory red tape and accelerate expansion. CfC Stanbic shareholders in June approved the plan to set up and capitalise an operation in South Sudan by December, saying the new unit will help to take greater advantage of the largely unexploited market in Africa’s newest country.
CfC Stanbic entered South Sudan in April 2012 and broke even by the end of that year — after operating for eight months only — a pointer to the lucrative nature of the Juba banking market.
Its incorporation as a branch, however, placed the unit under the supervision of the Bank of South Sudan (BoSS), South African Reserve Bank, Capital Markets Authority and the Central Bank of Kenya. The change comes after the BoSS in April announced that foreign banks will have to increase their paid up capital for subsidiaries to $25 million by December and $30 million a year later.
The bank said the decision to enter South Sudan as CfC Stanbic rather than the parent Standard Bank was meant to benefit minority shareholders who were the previous owners of CfC Bank prior to the merger of the two banks.
“In order to ensure that the Kenya minority shareholders realise the benefit of having operations in South Sudan it is important the South Sudan business is managed as a stand-alone entity,” said CfC.
Mr Mucai was previously the chief financial officer (CFO) of CfC Stanbic. Abraham Ongenge, formerly the financial controller at the bank, has now taken the position of CFO effective July.
KCB Bank, Equity and Co-operative Bank are the Kenyan lenders that run wholly owned subsidiaries in the oil producing country.
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