KCB headquarters in Nairobi: South Sudan accounted for 80 per cent of profits generated by Kenyan banks’ subsidiaries in Juba.
The South Sudan market accounted for 80 per cent of profits generated by KCB’s regional subsidiaries and all of Equity Bank’s business outside the country, helping to drive growth of the Kenyan companies’ earnings.
KCB Sudan contributed Sh840 million to the Sh1.05 billion pre-tax profits generated by the lender’s regional subsidiaries, while Equity Bank’s South Sudan subsidiary returned profits of Sh518 million, adding to Sh13 million profit made by the Ugandan business and helping to offset a Sh59 million loss by Equity Rwanda.
KCB, whose regional subsidiaries contributed to seven per cent of the lender’s profits this year, also operates in Uganda, Tanzania and Rwanda.
“All the other subsidiaries (besides South Sudan), having posted losses in previous years, managed to break even in 2011,” said the KCB director for financial planning and control, Mr Thomas Kiyai.
Equity Bank subsidiary in Uganda broke even last year to return Sh13 million compared to South Sudan’s Sh518 million having started operations in the same year 2008.
Commissions from foreign currency trading are a major source of income in South Sudan driven by capital inflows from donors financing infrastructure development.
In 2011, Equity Bank increased forex earnings to Sh1.9 billion up from Sh878 million in 2010, the bulk of which James Mwangi, the bank’s chief executive, said was attributable to its subsidiary in South Sudan.
KCB made Sh3.6 billion from forex trading, out of which Sh1.7 billion was earned from regional subsidiaries.
The two Kenyan banks have little competition in South Sudan, a country in the process of structuring itself following cessation from Sudan.
“They can generate transaction fees income because there is none lending loans since regulations on collateral system are not in place,” said Francis Mwangi, an analyst with Standard Investment Bank.
KCB enjoys 40 per cent market share served by 19 branches while Equity has seven branches up from three in 2010.
But their dominance could come under challenge following declaration of interest by other local banks such as Family Bank, Co-operative Bank and CFC Stanbic to enter the same market.
Family Bank has stated that it intends to establish a subsidiary from scratch in the new market, abandoning initial plans of a buy-out, citing lack of suitable acquisition targets.
CFC Stanbic is eyeing the corporate market which includes UN missions and NGO’s set up by different countries supporting efforts of the young nation.
Co-operative Bank expects to open its first branch in the country in the next six months, being a joint-venture with the government which seeks to support the co-operative movement.
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