Capital Markets

Banks book Sh14bn forex gain from foreign units


BDsillinganddollar

Tier one banks recorded currency gains worth Sh14.5 billion in the first half of the year due to the shilling’s depreciation against the local currencies. FILE PHOTO | SHUTTERSTOCK

Tier one banks recorded currency gains worth Sh14.5 billion in the first half of the year due to the shilling’s depreciation against the local currencies of regional subsidiaries, boosting the value of their earnings, dividends and assets.

This was a nearly four-fold rise compared to the gains worth Sh3.96 billion reported in the first half of last year.

Read: Dollar loans and liabilities rise on forex market woes

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 that there are exchange losses or gains factored in depending on whether the shilling has strengthened or weakened against the respective operating currencies of the subsidiaries.

The shilling depreciated by 18 percent against the Uganda shilling between June 2022 and June this year, and by 13 percent and 4.8 percent against the Tanzania shilling and Rwandese Franc respectively.

See also  Rachel Zegler Is Ready To Return To The DC Universe After Shazam 2

Lenders operating in the DRC have also recorded translated currency gains due to the strengthening of the dollar against the shilling by 19 percent in the year to June.

The DRC relies heavily on the US dollar as a medium of exchange in its local economy.

While most currencies in the region have come under pressure in the past two years amid global economic shocks, the Kenya shilling fared relatively worse to trade at record lows of 150 units to the dollar in recent days.

Equity Group, which in addition to Kenya also operates in Uganda, Tanzania, Rwanda, the Democratic Republic of Congo (DRC) and South Sudan, recorded the biggest currency gain at Sh6.3 billion, compared to Sh637 million in June 2022.

Others making significant gains were NCBA Group, I&M Group and DTB, which variously have regional subsidiaries in Rwanda, Uganda and Tanzania, Mauritius and Burundi.

DTB’s currency gains rose from Sh199.5 million in June 2022 to Sh2.56 billion this year, while I&M’s jumped from Sh494.1 million to Sh2.19 billion.

NCBA in the meantime booked a gain of Sh1.21 billion, up from Sh124.4 million in the first half of last year.

See also  Estimating impact of data breaches on brands and defining a future-ready strategy

KCB, which operates regionally in Uganda, Tanzania, Rwanda, Burundi, South Sudan and DRC, recorded currency gains worth Sh2.45 billion this year.

In the first half of 2022, the lender’s translated currency gains stood at Sh2.62 billion.

The currency gains have made regional subsidiaries more valuable by raising the value of their assets, earnings and dividends paid to the Kenyan parents.

Also read: Why you can’t get dollars while banks hold billions

The current foreign exchange gains are a contrast to the early years of regional expansion when Kenyan banks reported major losses in South Sudan, which suffered hyperinflation and devaluation of the South Sudanese pound.

→ [email protected]


Source link

(This article is generated through the syndicated feed sources, Financetin doesn’t own any part of this article)

Leave a Reply

Your email address will not be published. Required fields are marked *