Low growth rates to hit banks, says IMF

Lower growth rates across East Africa and turmoil in South Sudan will have an adverse impact on performance of Kenyan banks, the International Monetary Fund (IMF) has warned.

The fund, which has revised Kenya’s economic growth from 6.9 per cent to 6.5 per cent, says cross-border activities have exposed local lenders 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 fund said.

DOWN TURN

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 (CBA), Bank of Africa (BOAK), 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,” Habil Olaka, Kenya Bankers Association CEO, said.

According to the Central Bank of Kenya’s (CBK) 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.

(Daily Nation)