Banks trade in forex reaps good returns

Thursday, November 25th, 2021 00:00 | By
Equity Group managing director James Mwangi. Photo/PD/File

Equity Bank rode the remittances wave and leveraged recovery of international trade to curve close to 25 per cent of net earnings from foreign exchange income to beat other Kenyan banks.

The regional lender had made Sh5.6 billion from foreign exchange trading in the nine months to September 2021, up from Sh4 billion posted the same period last year.

It also capitalised on subsidiaries where there is high demand for foreign exchange to facilitate international traders and remittances from Africa.

Non-funded income
The move led to the group’s remittances to Kenya surging by 19 per cent in the nine months to September, which according to the World Bank hit Sh300 billion.

“Non-funded income grew by 29 percent faster than the interest income from loan book which grew by 24.4 per cent as the bank deployed deposits to high-earning asset base other than government securities.  We continue to look at where we can invest much for revenue,” Equity Group chief executive James Mwangi said during the latest investor briefing.

Forex trading is a major source of revenue for banks, coupled with the loan book and investments in government securities. KCB Group made Sh4.5 billion in forex trading during same period, up from Sh3.3 billion same period last year. Absa made Sh3.1 billion which was lower than the Sh3 billion posted the previous year.

Equity Bank made a string of acquisitions across the continent in an expansion spree that strategically positions it to reap from trade finance and forex deals.

The Kenya shilling was volatile this year, losing nearly 10 per cent to trade Sh111 against the dollars handing gains to companies that trade in US dollars but report their earnings in local currency.

This year also saw a strong recovery in international trade as companies moved to secure their international inventories after trade routes shut down last year due to the Covid-19 containment measures.

More on Business