Lower growth rates across East Africa and turmoil in South Sudan
will have an adverse impact on the performance of Kenyan banks, the
International Monetary Fund (IMF) has warned.
The
IMF which has revised Kenya’s Economic growth from 6.9 per cent to 6.5
per cent says cross border activities have exposed Kenyan banks to
economic downturn across the region.
“In
the event of economic distress in East Africa, in particular South
Sudan, the IMF noted that cross-border activities of Kenyan banks could
be adversely affected,” a statement by the IMF read.
REGIONAL BANKS
Eleven
Kenyan banks have subsidiaries in the East African Community (EAC)
member states as well as South Sudan where three, KCB, Equity and Co-op
have operations.
Others in the region include DTB,
Commercial Bank of Africa, Bank of Africa, Guaranty Trust Bank, I&M
Bank, Imperial Bank, ABC and NIC Bank.
“Any
cross border business will be affected by the down turn in the sector,
but South Sudan has more vulnerability because of their political
situation,” Kenya Bankers Association CEO Habil Olaka said.
According
to the Central Bank of Kenya’s annual supervisory report for 2014,
released in June, Kenyan 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.
SOUTH SUDAN TURMOIL
South
Sudan was hit by political instability which 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.
An uneasy calm has
since returned to the country after President Salvar Kiir and his rival
Riek Machar signed a peace deal on August 26, this year.
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