The Weekly Brief, by The Kenyan Wall Street, is a newsletter that goes out to 25k+ subscribers every Monday morning at 9 am (EAT).

It’s mid month, and that always means its fuel week again.

Last time, fuel prices dropped by a barely noticeable KShs. 1 at the pump. Predictions vary for what will happen this week, but it’s likely that any FX impact from the recent downward swing will not reflect just yet. So it’s best to expect no major changes.

In this week’s issue, Kenya’s lenders grew by all major metrics in Q423, why two of Kenya’s listed companies have exited regional markets, and the blood in Egypt’s FX markets.

Kenya’s Banks Grow But Expenses Eat into Profits-Q423 CBK Survey

Kenya’s Banking Sector aggregate balance sheet size increased by 4.2% to KSh7.7 trillion in December 2023, from KSh 7.4 trillion in September 2023, according to the latest Credit Officer Survey by the Central Bank of Kenya (CBK).

• Total deposits increased by 5.7 percent from KSh5.5 trillion in September 2023, to KSh 5.8 trillion in December 2023.

• The capital adequacy ratio decreased to 18.3 percent in December 2023, from 18.6 percent in September 2023.

• It also found that loans disbursed by banks reached a total of KSh 4.2 trillion in December 2023.

The Banking industry’s asset quality, measured by gross nonperforming loans to gross loans ratio, improved from 15.0 percent in September 2023 to 14.8 percent in December 2023. This was due to a lower increase in non-performing loans of 0.7 percent.

Some of the big-ticket borrowers, according to the CBK survey, were in the Manufacturing, Trade, Financial Services, and Personal and Household sectors. The Survey expects the level of non-performing loans or defaults to increase in the Personal and Household Sectors, and Trade in tandem with the expected increase in demand for credit.

Quarterly pre-tax profits fell by KSh 9.1 billion from KSh 57.6 billion in September 2023, to KSh 48.5 billion in December 2023, due to an increase in quarterly expenses.

Read more.

Headlines You Might Have Missed

• Disruptive innovations in Africa’s digital payments, Kora’s dashboard and API have been designed in a manner that helps businesses track their financial transactions easily.

• All public sector electronic advertising will now be channeled through the Kenya Broadcasting Corporation (KBC), according to a recent government circular.

• Africa Fintech Summit has announced its first roadshow ahead of AFTSNairobi in September. The roadshow will be held on the sidelines of the IMF/World Bank Spring Meetings on April 17, 2024, in Washington DC.

• Bamburi Cement and East African Cables, both PLCs, have exited Uganda and Tanzanian markets by selling majority stakes in their subsidiaries there.

• The private sector hired more casual workers in February, as consumer demand begun a turnaround for the first time in months, Stanbic Bank Kenya PMI shows.

Egypt Devalues Currency and Hikes Interest Rates

In the middle of last week, the Egyptian Pound lost more than 55% of its exchange rate value against the dollar after the country’s central bank adopted a flexible exchange rate and hiked interest rates.

• After an impromptu monetary policy meeting on Wednesday, the Central Bank of Egypt (CBE) raised interest rates by 600 base points, the second increase in a year.

• The interest rate hike, and a flexible exchange rate, were preconditions for Cairo to get more assistance from the International Monetary Fund.

• The moves follow a $35bn deal with the United Arab Emirates (UAE) which analysts have suggested provided a buffer for tougher fiscal decisions.

Egypt is facing multiple internal economic crises, but its recent decisions are also driven by external ones including the Israel-Palestine conflict, shipping attacks in the Red Sea, and other geopolitical concerns.

The currency devaluation is the fourth since early 2022 and with it came immediate effects. Credit ratings agency Moody’s revised the country’s outlook from negative to positive, and the country secured $8bn, and $1.2bn for sustainability, from the IMF just hours after announcing the policy changes.

During a televised seminar, the country’s president Abdel-Fattah al-Sisi said that the drastic policy changes were made possible in part because of the tens of billions of dollars in new financing. This will fix the hard currency crunch the country has been facing, although the country’s banking federation’s head urged caution “because part of the recent inflows are hot money,” meaning short-term capital investments.

Read how Kenya is wooing Egyptian investors with the its trade deals with the EU and the US.

Upcoming Events

Propak East Africa 2024: 12-14 March, Nairobi

11th East Africa Property Investment Summit: 17-18 April, Nairobi

AmCham Business Summit 2024: 24 April, Nairobi

Nairobi Global Business Expo and Conference: 11 April, Nairobi

Interview of the Week

Interview with Natasha Hazan, the SVP Selection & Program, Kauffman Fellows

Have a great week!