KCB’s foreign subsidiaries outpace Equity banks

KCB chief executive Joshua Oigara. KCB units got boost from transaction banking. FILE  Nation Media Group

By DAVID HERBLING

In Summary

• KCB's regional branches reported a 80 per cent increase in net profit to Sh879 million in the six months to June.

KCB foreign subsidiaries outperformed Equity Bank’s in the six months to June helped by increased income from transactions.

The bank’s network of regional branches reported a 80 per cent increase in net profit to Sh879 million in the six months to June while that of Equity Bank and business lines dropped to Sh144 million compared to Sh348 million in the period under review.

KCB, which is Kenya’s largest bank by assets, operates in Tanzania, Rwanda, Uganda, South Sudan and Burundi while Equity has a presence in the foreign markets save for Burundi.

Both banks recorded gains in lending income from the subsidiaries, but KCB outpaced Equity in earnings from transaction incomes such as ATM charges, over-the-counter withdrawals.

Equity’s transaction income increased 8.5 per cent to Sh607 million and KCB grew income from the segment to Sh1.39 billion from Sh405 million.

James Mwangi, Equity Bank CEO, blamed the suspension of donor funding in Rwanda and Uganda as well as the hostility between Sudan and South Sudan for poor performance of the foreign units.

KCB chief executive Joshua Oigara said foreign subsidiaries got a lift from transaction banking, adding that the units contributed 11 per cent of profit in the half to June, up from 7.4 per cent in the same period last year.  

“Fifteen per cent is a good target in the short term, 25 per cent in the mid-term,” said Mr Oigara last week. KCB says once the performance of existing subsidiaries was consolidated, the Kenyan bank would also look to Somalia and Djibouti.

The 11 banks with foreign subsidiaries had a combined profit of Sh5.1 billion last year, up from Sh2.3 billion the previous year-- underlining the importance of the units to the lenders’ bottom lines.