Kenyan banks booked Sh57 billion in currency losses in the financial year ended December 31, 2024, after the shilling appreciated against the dollar and the currencies of the countries in the region where they have subsidiaries.
Last year, the Kenya shilling gained by 14.8 percent against the Uganda shilling, 15.3 percent against the Tanzania shilling, 20.4 percent versus the Burundian franc, and 25 percent against the Rwandese franc.
It reversed depreciation of between 7.1 percent and 19.7 percent seen in 2023 against these regional currencies, which had resulted in currency translation gains of Sh31.9 billion for the lenders.
These currency translations affect the value of assets and liabilities, earnings and dividends, or distributions made to the parent firm.
Tier one lenders Equity Group, KCB Group, NCBA, DTB Group, Stanbic Bank and I&M Group operate regional subsidiaries, spread across Uganda, Tanzania, Rwanda, South Sudan, Burundi, and the Democratic Republic of Congo (DRC).
These subsidiary units traditionally prepare their financials in their home currencies (functional currency). However, when the financials are amalgamated into the group business financial reports, the currency is translated into shillings.
This means that there are exchange losses or gains, depending on whether the shilling has strengthened or weakened against the respective operating currencies of the subsidiaries.
Equity Group, whose regional subsidiaries in Uganda, Tanzania, Rwanda, the DRC, and South Sudan now account for half of its balance sheet of Sh1.8 trillion, reported a currency translation loss of Sh22.8 billion, compared to a gain of Sh17.4 billion in 2023.
The lender also partly attributed the decline in its loan book to Sh819.2 billion from Sh887.4 billion in 2023 to currency translation losses on loans in regional units.
The shilling value of the assets in the bank’s DRC subsidiary Equity BCDC was also hit by the shilling’s gain of 21 percent versus the dollar last year, compared to a depreciation of a similar margin in 2023.
The DRC significantly uses the US dollar as a medium of exchange in its local economy, feeding into the currency translation losses for Kenyan banks.
KCB Group, which has subsidiaries in the DRC, Uganda, Tanzania, Rwanda, Burundi, and South Sudan, reported a forex translation loss of Sh17.1 billion in the period, compared to a gain of Sh1.96 billion in 2023. KCB and Equity, the biggest lenders in the region by asset size, have in the last few years aggressively expanded their footprint in the region through acquisitions, particularly in Rwanda and the DRC.
I&M Group followed with translation losses of Sh7.3 billion, against a gain of Sh5.4 billion in 2023, while DTB reported a loss of Sh6.3 billion versus a gain of Sh5.3 billion the previous year.
NCBA’s losses amounted to Sh2.6 billion, reversing gains of Sh2.04 billion in 2023, while Stanbic’s translated currency losses from its South Sudan unit deepened to Sh951 million from Sh222 million in 2023.
