Kenyan currency notes.

Kenyan currency notes.

| File | Nation Media Group

Top banks book Sh35bn forex gain from foreign units

Top Kenyan banks booked gains worth Sh35.8 billion when converting the 2023 financials of regional subsidiaries into Kenya shillings, reflecting the effect of a weaker currency in the period under review.

The exchange gains of the six tier-one banks that operate units in the region rose from Sh6.6 billion in 2022, boosting the value of assets, earnings and dividends from these subsidiaries.

Regional subsidiaries normally prepare their financials in their home currencies (functional currency), but when the financials are amalgamated into the group, the currency is translated into shillings (reporting currency).

This means there are exchange losses or gains depending on the strength of the shilling.

The shilling depreciated against a majority of regional currencies last year. It slid by 19.7 percent against the Uganda shilling, 15 percent against the Tanzania shilling and by 7.1 percent against the Rwandese Franc.

Biggest lender

Although it made a gain of 3.3 percent on the DRC Congo Franc, the fact that the Congolese economy is highly dollarised meant that the banks operating there made gains owing to the shilling’s 21 percent slide against the US currency in the period.

Equity Group recorded the biggest currency gain from Sh2.94 billion in 2022 to Sh17.42 billion in 2023. The bank operates subsidiaries in Uganda, Tanzania, Rwanda, DRC and South Sudan.

It was followed by KCB Group, whose units in Uganda, Tanzania, Rwanda, Burundi, South Sudan and DRC gave the group currency gains worth Sh5.86 billion from Sh787 million in 2022.

NCBA Group, I&M Group and DTB, which have regional subsidiaries in Rwanda, Uganda and Tanzania, Mauritius and Burundi made large gains in their currency translation.

I&M’s currency gain rose to Sh5.36 billion in 2023 from Sh1.37 billion a year earlier.

DTB’s was Sh5.32 billion from Sh1.61 billion in 2022, while NCBA reported a gain of Sh2.03 billion, from Sh305.2 million in 2022.

Equity and KCB, which are the biggest in the region by asset size, have been aggressively expanding their footprint in the region via acquisitions, particularly in the DRC and Rwanda.

KCB acquired Congolese lender Trust Merchant Bank (TMB) in 2022, having taken up a majority stake in Rwandese lender Banque Populaire du Rwanda Plc (BPR) in 2021.

Equity took up a majority stake in DRC lender Banque Commerciale Du Congo (BCDC) from 2020, merging it with earlier acquisition ProCredit, which had been renamed Equity Bank Congo, to create Equity BCDC.

A merger

In December 2023, Equity completed the acquisition of Rwandese lender Compagnie Générale de Banque (Cogebanque) and merged it with Equity Bank Rwanda Plc.

In its financial report for 2023, Equity said that subsidiaries grew their contribution to the bank’s net profit by a third to Sh15.3 billion, with the DRC unit accounting for Sh12.1 billion in net earnings.