Tanzania has turned out to be a rich hunting ground for Kenyan banks with subsidiaries in the neighbouring country outperforming South Sudan whose profit contribution has been hit by political instability in the young nation.

The Central Bank of Kenya’s (CBK) annual supervisory report for 2014 shows that Tanzanian subsidiaries outperformed operations in all other regional countries such as Uganda, Rwanda and South Sudan in terms of profitability, value of assets, total loans disbursed and net value of deposits.

The subsidiaries registered combined profit before tax of Sh5.5 billion compared to Sh5.2 billion the previous year, with Tanzania accounting for 32 per cent of the total earnings.

“The (South Sudan) crisis led to a hard currency shortage with wide discrepancies between official exchange rates and black market exchange rates. Subsequently, this affected Kenyan customers of subsidiaries in South Sudan as they were not able to fully draw on their South Sudan Pound-denominated accounts after fleeing back to Kenya at the height of the crisis,” says the CBK report.

Ten Kenyan banks have subsidiaries in the East African Community (EAC) member states and South Sudan.

They are KCB, DTB, Commercial Bank of Africa (CBA), Bank of Africa (BOAK), Equity Bank, I&M Bank, Imperial Bank, ABC, NIC Bank and the Co-op Bank.

Subsidiaries operating in South Sudan accounted for 26.3 per cent of the total profits, although only three banks, KCB, Equity and Co-op have operations there.

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Uganda units accounted for 21.4 per cent of the total profits. The number of subsidiaries that registered losses reduced to four from the previous eight.

“Two of the subsidiaries that registered losses before tax were operating in Uganda, indicating stiff competition though one of them had the subsidiary set up in year 2013 and is, therefore, still new to the market. The rest are subsidiaries in Tanzania (one) and Rwanda (one),” says the CBK report.

The political crisis in South Sudan began on December 15, 2013 with disagreements between two factions in the ruling party that subsequently degenerated into an armed conflict spreading to other parts of the country, especially the Northern states.

CBK says that as a mitigating measure, banks put up service desks in their Nairobi branches of the parent institutions for the customers who were evacuated from South Sudan as well as in all the branches in the troubled country for those who remained.

Despite the instability caused by the strife, the operations of the banks’ subsidiaries are ongoing. The only exceptions are in Bor, Bentiu and Malakal where the banks have closed branches.

The subsidiaries had in their books gross loans worth Sh189.3 billion against Sh149.6 billion the previous year. Tanzania accounted for 45.2 per cent of the total loans, Uganda 28.2 per cent while operations in Rwanda accounted for 17.2 per cent of the lending.

The subsidiaries had gross deposits worth Sh319.7 billion compared to Sh236.5 billion in the previous year.

The lenders with operations in Tanzania had the highest deposit concentration and accounted for 33.7 per cent of the total deposits, South Sudan’s stood at 27.7 per cent while those in Uganda accounted for 23.1 per cent of the total deposits.

“The subsidiaries had a total of 5,759 employees compared to 5,219 the previous year. Uganda had the highest number of employees at 38.5 per cent in tandem with the number of branches of the subsidiaries located there.”

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