Archive for: May 2017

BREAKING NEWS: KCB (Kenya Commercial Bank) to close South Sudan branches due to war shocks

By DAVID HERBLING, THE EASTAFRICAN, MAY/03/2017, SSN

IN SUMMARY:

***KCB wants to cut its exposure in South Sudan where the bank took a Sh3.4 billion hit due to hyperinflation in 2016.
***The impending closure of branches in South Sudan is likely to lead to job losses, KCB warned, saying the actual number of workers to be affected will be known in due course.
***KCB ventured into South Sudan in 2006 and the wholly-owned subsidiary quickly rose to become the most profitable unit;

East Africa’s biggest bank by assets KCB Group plans to shut down some of its branches in South Sudan, citing civil strife, devaluation of the country’s currency, and hyperinflation which negatively impacted the lender’s earnings last year.

KCB, which has 19 branches in South Sudan, now wants to cut its exposure in Africa’s newest nation where the bank took a Ksh3.4 billion ($34 million) hit due to hyperinflation in 2016.

“KCB Group board of directors has approved the temporary closure of some branches in South Sudan, driven by logistical and operational challenges that have made operating some of these branches unsustainable,” the bank told the Business Daily.

“A change in the economic situation will lead to a re-assessment of the viability of branches.”

South Sudan’s inflation rate hit 830 per cent in late 2016, and the South Sudanese pound has been on a free fall — currently trading at 108 units to the US dollar compared to 2.95 units at which it was fixed until December 2015 when Juba adopted a free floating foreign exchange regime.

The impending closure of branches in South Sudan is likely to lead to job losses, KCB warned, saying the actual number of workers to be affected will be known in due course.

“Naturally, any branch closures will lead to staff re-assessment but, as mentioned earlier, this is work in progress and we cannot therefore, at this time, quantify the number of staff who will be affected,” the bank said.

Juba woes

KCB ventured into South Sudan in 2006 and the wholly-owned subsidiary quickly rose to become the most profitable unit.

The macroeconomic troubles saw the Juba-based unit plunge into the red, with a loss of Ksh759 million ($7.59 million) last year from a net profit of Ksh17.8 billion ($178 million) in 2015.

But Stanbic, which reported a loss of Ksh1.1 billion ($11 million) from the Juba unit due to spiralling inflation, said the lender has no plans to withdraw from the troubled country despite the tough operating environment.

“Stanbic Bank is not withdrawing from South Sudan,” the bank told the Business Daily.

This is the second round of headwinds hitting KCB operations in South Sudan after the outbreak of civil war in December 2013 following clashes between government forces and rebels allied to former vice-president Riek Machar.

KCB in January 2014 shut three branches in the towns of Bor, Bentiu and Malakal, due to the conflict in the fledgling economy.

“Any business decision by KCB Group is made to protect the interests of shareholders,” said the bank.

All the four Kenyan banks with regional operations in South Sudan booked massive losses linked to hyperinflation and loss in value of the local currency.

Co-op Bank reported a Ksh498.3 million ($4.98 million) hit from the South Sudan hyperinflation, and Equity Bank suffered a Ksh129 million ($1.29 million) monetary loss.