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Stable shilling cuts banks’ losses from regional units
When the shilling strengthens, the translated value of a bank’s regional assets falls—as was the case last year—since their home units translate into fewer Kenyan shillings.
The shilling’s stable run against the dollar and regional currencies in Eastern Africa helped Kenyan banks slash their translated foreign currency losses from regional subsidiaries to Sh528 million last year, from Sh57 billion in 2024.
A weaker shilling results in a higher value of dividends and assets reported by subsidiaries in the region, and the opposite is true when the local currency appreciates.
In contrast to 2024, the shilling was fairly muted in its movement in the forex market last year, helping the banks avoid the losses reported previously when they standardised the reporting currency on their group balance sheets to the Kenyan unit.
The shilling depreciated by 1.2 percent against its Ugandan counterpart, compared to a gain of 14.8 percent in 2024. It was up by 0.21 percent versus the Tanzanian shilling, compared to a gain of 15.3 percent a year earlier.
The Kenyan currency also gained by 4.2 percent and 0.26 percent against the Rwandan and Burundian francs respectively last year, which was significantly lower than the respective gains of 25 per cent and 20.4 percent seen in 2024.
Tier One lenders Equity Group, KCB Group, NCBA Group, DTB Group, Stanbic and I&M Group operate regional subsidiaries spread across Uganda, Tanzania, Rwanda, South Sudan, Burundi and the Democratic Republic of Congo (DRC).
The regional units normally prepare their financial statements in their home currencies (functional currency), but when the financials are amalgamated into the group, the currency is translated into Kenyan shillings (reporting currency).
These currency translations affect the value of assets and liabilities, earnings and dividends or distributions made to the parent, with exchange losses or gains factoring in, depending on whether the shilling has strengthened or weakened against the respective operating currencies of the subsidiaries.
When the shilling strengthens, the translated value of a bank’s regional assets falls—as was the case last year—since their home units translate into fewer Kenyan shillings.
For instance, a loan sitting on the books of a Ugandan subsidiary, which is denominated in Ugandan shillings, would be worth less when translated into the group books if the shilling has made a gain against its Ugandan peer.
A weaker shilling, in turn, inflates the value of the subsidiary contributions to the group balance sheet.
Assets denominated in dollars also change in value depending on the shilling’s performance against the greenback in the forex market. Last year, the shilling appreciated by 0.21 per cent versus the dollar, compared to a gain of 21 per cent the previous year.
Equity Group, which operates subsidiaries in Uganda, Tanzania, Rwanda, the DRC and South Sudan, reported a currency translation loss of Sh3.1 billion in 2025, down from Sh22.8 billion in 2024.
In 2023, when the shilling had weakened against regional peers and the dollar, Equity had reported a currency translation gain of Sh17.4 billion.
KCB Group, which has subsidiaries in the DRC, Uganda, Tanzania, Rwanda, Burundi and South Sudan, reported a forex translation gain of Sh1 billion, compared to a loss of Sh17.1 billion in 2024.
Equity and KCB, 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.
The DRC significantly uses the US dollar as a medium of exchange in its local economy, feeding into the currency translation losses or gains for Kenyan banks.
I&M Group reported a translation loss of Sh215 million, down from Sh7.3 billion in 2024, while DTB reported a gain of Sh2.02 billion, versus a loss of Sh6.3 billion the previous year.
NCBA’s losses narrowed to Sh189 million from Sh2.59 billion in 2024, while Stanbic’s translated currency losses from its South Sudan unit narrowed to Sh14 million, from Sh951 million previously.
