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Kenya bank sector increases presence in East Africa

Many Kenyan banks have expanded their operations to East Africa Community (EAC) partner States and South Sudan.

The banks have increased their footprints in the region, dominating their counterparts from other nations. Kenyan banks operate at least 223 branches in the region comprising of Tanzania, Uganda, South Sudan, Rwanda and Burundi.

Leading the pack, according to the latest Bank Supervision Report 2011 from Kenya’s Central Bank, are Kenya Commercial Bank and Equity Bank. The former has 14 branches in Uganda, 11 in Tanzania, nine in Rwanda and 19 in South Sudan. On the other hand, Equity has five branches in Rwanda, 38 in Uganda and four in South Sudan.

The two are followed by Bank of Africa, which has 28 branches in Uganda and 16 in Tanzania and Diamond Trust, which four branches in Burundi, 22 in Uganda and 14 in Tanzania.

Other banks that have branches in the region include Fina Bank, I & M Bank, Imperial Bank, African Banking Corporation and NIC Bank.

Most of the expansion has taken place in the last three years, with the banks competing to set up many of their branches in Uganda.

The East African country is home to 113 branches of Kenyan banks, with Bank of Africa, Diamond Trust and Equity leading others.

“As at December 31, 2011, ten Kenyan banks had subsidiaries operating in the EAC partner States and South Sudan. Seven banks had opened operations in Uganda, six in Tanzania, three in Rwanda, one in Burundi and two in Southern,” says the report.

Some of the banks have also acquired stakes in other banks outside EAC region, thus increasing their footprint in Africa.

“I & M Bank (K) has shareholding equivalent to 50 percent in Bank One in Mauritius while Prime Bank (K) has shareholding equivalent to 11.4 percent in First Merchant Bank in Malawi,” says the Central Bank report released last week.

The increase in subsidiaries has enabled Kenyan banks improve their performance and capital base. The banks, according to the Central Bank annual report, have gross loans amounting to over 1.1 billion U.S. dollars.

“Subsidiaries operating in Tanzania accounted for 47.9 percent of the total loans while those operating in Uganda accounted for 33.7 percent,” says the report.

Similarly, deposits for the Kenyan subsidiaries have grown to approximately 1.8 billion dollars.

“Subsidiaries had gross deposits worth 1.79 trillion dollars. Subsidiaries operating in Tanzania accounted for 38 percent of total deposits, while those in Uganda accounted for 24.2 percent,” says the report.

Interestingly, South Sudan’s subsidiaries accounted for 27.6 percent of the total deposits, although only two banks, Equity and Kenya Commercial Bank have operations there.

In terms of profit, the banks continue to have positive impact on their parent companies in Kenya. The branches in the period under review registered profit before tax of 27 million dollars.

“Subsidiaries registered profit before tax of 27.4 billion dollars. Subsidiaries operating in Tanzania accounted for 33.8 percent of total profits, while those in Uganda 27.3 percent and those in South Sudan accounted for 42 percent,” says the report.

The regulator notes that South Sudan has great potential, thus many Kenya’s banks are likely to start operations there. Among them is Family Bank, which announced this year that it will open branches in the new State.

On the other hand, Kenya Commercial Bank has moved to link all its branches in Kenya and in the region through a Diaspora account, as it positions itself to be the leader in EAC.

However, it is not an easy ride for Kenyan banks. Stiff competition from local banks has seen some subsidiaries, especially those in Rwanda and Uganda, make loses.

“Two banks operating in Uganda registered loss before tax, indicating stiff competition, while one bank registered a loss in Rwanda since the subsidiary was set up during the year and therefore the loss was attributed to formation costs,” says the report.

The total assets of the subsidiaries stand at 2.4 billion dollars. In total, the banks have employed 3,760 people, some of them from Kenya but majority are locals. Uganda leads with 1,608 employees.
01 June 2012

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