KCB invests Sh905m in Tanzania, Rwanda units

KCB Group #ticker:KCB has invested an additional Sh905 million in its Tanzania and Rwanda units to shore up their capital and position them for more growth.

The lender provided Sh519 million to its Tanzanian subsidiary in the year ended December, according to its latest annual report.

This raised its cumulative investment in the unit, which runs 14 branches, to Sh3.5 billion.

The Rwandan subsidiary, which also operates 14 branches, received a new capital investment of Sh386 million in what raised total investment in that unit to Sh2.2 billion.

The additional investments left KCB’s ownership unchanged at 100 percent in each case.

The lender’s chairman Andrew Kairu said in the annual report that Kenya is overbanked compared to peers in Africa such as Nigeria and South Africa and that better returns may be realised in subsidiaries.

“Economies like Rwanda and Tanzania have demonstrated the capacity for higher returns in the financial services sector.

“KCB remains open to opportunities to further grow the financial sector,” he said.

The additional capital in Tanzanian unit was partly linked to new prudential rules by Bank of Tanzania that put a strain on the lenders’ capital.

The regulator cut the period of writing off non-performing loans from three to one year.

The rule ignored the value of securities held for bad debt written off under the more conservative international financial reporting standard (IFRS) 9 that set in last year.

KCB’s move mirrored that of Equity, which added Sh1 billion in its Tanzanian unit while NIC Group also provided an extra Sh350 million of new capital to its unit in that market.