The Democratic Republic of Congo (DRC), Rwanda and Tanzanian markets offered a profitable ground for Kenya’s retail banks cashing in on regional operations to bolster their incomes amid surging bad loans at home.

Audited financial statements shows KCB, Equity, NCBA and I&M groups generated a combined $228 million in profit from their subsidiaries from the three countries during the financial year ended December 31, 2014, their highest earnings compared with those from other regional markets, Uganda, Burundi and South Sudan.

According to the financial statements, DRC was the standout market for KCB and Equity, where the two lenders posted $80.85 million and $120.93 million in net profit respectively.

Kenyan banks first entered the Congolese banking market in 2016 when Equity Group acquired an 86.6 percent stake in a German bank ProCredit between 2015 and 2017 and renamed the subsidiary Equity Bank Congo (EBC) SA.

Equity Group further acquired a 66.53 percent stake in another Congolese lender Banque Commerciale Du Congo (BCDC), the country’s second-largest lender by assets, and merged the two subsidiaries to form EquityBCDC.

KCB entered the market through the acquisition of 85 percent stake in the Congolese Trust Merchant Bank (TMB) in December 2022.

KCB Group’s net profit rose to Ksh61.8 billion ($479.06 million) in 2024, from Ksh37.5 billion ($290.69 million) a year earlier, with subsidiaries outside of Kenya contributing 30.3 percent of the group’s net profit, albeit marking a drop from 35.1 percent in 2023 on strong growth by KCB Kenya.

The overall net profit from subsidiaries outside Kenya grew 42 percent to Ksh19.6 billion ($151.03 million), even though KCB Kenya reported the highest growth in net profit, at 77 percent during the year.

The subsidiaries’ contribution to the overall net profit were DRC ($80.85 million), Rwanda ($23.41 million), Tanzania ($20.15 million), Uganda ($8.68 million) and Burundi ($6.13 million). South Sudan made a loss of $3.51 million.

The subsidiaries’ contribution to KCB’s total income were, DRC ($237.67 million), Rwanda ($78.37 million), Tanzania ($48.68 million), Uganda ($42.48 million), South Sudan ($31.7 million), Burundi ($14.8 million).

Equity Group posted a 12 percent growth in net profit to Ksh48.8 billion ($378.29 million) in the year ended December 31, 2024, largely as a result of lower provisioning for impaired loans and improved performance by the regional subsidiaries, whose contributions to the group’s earnings increased by nine percentage points.

The group’s operations in DRC recorded a 29 percent growth in net profit to $120.93 million, followed by Rwanda, which grew by 30 percent to $41.86 million followed by Tanzania, which grew by 107 percent to Ksh1.2 billion ($9.3 million) and Uganda, which grew by 186 percent to $4.65 million.

The subsidiary in South Sudan, which operates five branches, reported a 40 percent decline in net profit to Ksh1.3 billion ($10.07 million).

Overall, the subsidiaries’ contributions to the group’s profit increased to 50 percent, from 41 percent in 2023.

NCBA’s regional business has undergone significant transformation from negative performance in 2020 to a 13 percent contribution to profit before tax (PBT) in 2024. The group’s PBT profit declined by one percent to Ksh25.14 billion ($194.88 million) in 2024 from Ksh25.48 billion ($197.51 million) in 2023.

The PBT for the Ugandan business declined by 21 percent to Ksh429 million ($3.32 million) from Ksh545 million ($4.22 million), while that of Rwanda declined by 60 percent to Ksh130 million ($1 million) from Ksh331 million ($2.56 million).

NCBA’s Tanzanian subsidiary recorded a seven percent growth in PBT to Ksh464 million ($3.59 million), from Ksh432 million ($3.34 million).

NCBA Tanzania had the highest return on average equity at 38.4 percent, followed by NCBA Uganda (31 percent), NCBA Kenya (19.2 percent) and NCBA Rwanda (15.7 percent).

I$M Group made more money in Rwanda, where its subsidiary in Kigali contributed Ksh2.9 billion ($22.48 million) to its PBT, followed by Mauritius ($14.65 million), Tanzania ($8.21 million) and Uganda ($6.2 million).

The subsidiaries’ contribution to I&M Group’s profit before tax increased to 29 percent in 2024, from 24 percent in 2023.

Disclosures by the Central Bank of Kenya (CBK) showed that the pre-tax profit realised by regional subsidiaries of Kenyan banks more than doubled to Ksh66.13 billion in 2023 from Ksh32.51 billion in 2022.

The DRC market contributed the highest proportion of the total earnings by Kenyan banks’ subsidiaries, equivalent to 45.52 percent ($232.55 million). Subsidiaries in Rwanda and Uganda contributed 20.89 percent and 13.45 percent of the total profits respectively, while units in Tanzania contributed 8.53 percent of the total profit.

According to the CBK, subsidiaries in South Sudan, Mauritius and Burundi were the least profitable, contributing 6.67 percent, 3.4 percent and 1.56 percent of the total profits respectively.

Rwanda was Kenya’s profitable banking market from 2017 to 2022, while South Sudan and Tanzania topped the earnings list in 2015 and 2016 respectively. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).