Eight large banks have reported a 40 percent drop in earnings from foreign exchange trading in the first half of the year as a static shilling against the dollar narrowed the margins they enjoy from buying and selling the greenback.
The tier-one banks, which had released their 2025 half-year financial results by Friday, saw their forex trading earnings decline to Sh22.2 billion from Sh36.9 billion in the first six months of 2024.
The shilling has traded within a stable and narrow range of Sh129.04 to Sh129.80 to the dollar since August 2024.
In contrast, the first half of the year saw the currency at its most volatile in decades, where the rate oscillated in a range of Sh128 and Sh161 amid a dollar supply problem caused in part by a dysfunctional interbank market.
Once the hiccups were resolved by the end of the second quarter of 2024, the rate stabilised and dollar supply improved significantly.
This, however, had the effect of reducing the margin between buying and selling prices quoted by banks and forex bureaus in the currency market going forward.
In early 2024, the dollar’s buy-sell spread margin had gone as high as 13 units, but this has since come down to between 4.5 and Sh6.5 units among tier one banks, which control the bulk of the forex market.
“The forex market has been unbelievably stable…it’s a great thing that brings stability, but banks like a little bit of volatility. This lack of volatility has affected some of our global markets business,” Stanbic Kenya Holdings chief executive Patrick Mweheire said at the lender’s half-year financial briefing on August 7.
The biggest drop in forex trading income in percentage terms was reported by Standard Chartered Bank Kenya at 59.5 percent to Sh1.99 billion, from Sh4.92 billion last year, followed by Stanbic, whose forex revenue fell by 58.2 percent to Sh1.96 billion, from Sh4.7 billion.
KCB Group’s revenue from forex trading declined by 48 percent to Sh5.19 billion, Equity Group by 21.1 percent to Sh5.2 billion, and Co-operative Bank by 41.6 percent to Sh1.5 billion.
Narrowing down to the two lenders’ local operations, KCB Bank Kenya reported a forex revenue drop of 48 percent to Sh3.17 billion, while Equity Bank Kenya’s forex revenue was down by 36.2 percent to Sh1.3 billion.
Others were Absa Bank Kenya, down by 14 percent to Sh3.14 billion, while I&M Bank’s earnings fell by 8.1 percent to Sh1.67 billion and DTB’s by 41.4 percent to Sh1.53 billion. NCBA was yet to release its financials by Friday.
The effect of the lower forex trading revenue was seen on eight banks’ non-interest income, which collectively declined by 8.8 percent to Sh118.54 billion.
Of the eight, only Absa and I&M reported higher non-funded income in the half-year period, with increases of 3.3 percent and 12.9 percent, respectively, to Sh9.12 billion and Sh6.95 billion.
