NAIROBI, Nov. 11 (Xinhua) -- Rwanda, Democratic Republic of Congo (DRC) and Burundi are emerging as the best markets for Kenyan banks expanding across Africa as Uganda and Tanzania, once-lucrative market falter, says a new study released on Monday.

Increased competition from local players in Uganda and Tanzania has made the business environment tough for Kenyan banks, with profits from the country shrinking, the Banking Supervision Report 2018 released by the Central Bank shows.

The report reveals that while Kenyan banks regional subsidiaries registered a 31.5 percent increase in total profit before tax, which stood at 11.57 billion shillings (113 million U.S. dollars) as at December 31, 2018, up from 85 million dollars in 2017, Uganda contributed the least.

"The improvement in profitability was specifically from subsidiaries in the Democratic Republic of Congo, Burundi, Rwanda and Mauritius. Uganda topped the list of loss-making subsidiaries thus recording the lowest increase in profits," said the central bank.

The performance of Ugandan subsidiaries, according to the bank, was due to low business following increased competition in a market dominated by established local players.

The profitability of the subsidiaries in South Sudan significantly improved in 2018, attributable to the collaborative peace initiatives and improvement in the macro-economic environment that has seen political risks decline.

Rwanda contributed the best earnings capacity despite having fewer subsidiaries compared to Uganda and Tanzania, according to the Central Bank.

Its subsidiaries accounted for 273 million dollars in profits, a 24.12 percent of the total profits.

However, despite the loss making, Uganda remained the country with the highest number of subsidiaries in the region, at 104, followed by Tanzania at 76 and Rwanda at 56.

The subsidiaries employed a total of 6,301 employees, a 3.2 percent increase, compared to 6,106 the previous year.

"The increase was attributed to the additional branches in Uganda and Rwanda in 2018. Uganda had the highest number of subsidiaries' bank employees at 2,073 compared to 1,879 in 2017. This accounted for 33 percent of the total number of employees as Uganda has the largest proportion of subsidiaries' branches in the region," said the apex bank.

As the Ugandan market gets tougher, the Kenyan banks are increasingly expanding beyond the East Africa Community boundaries.

I&M Bank Limited, for instance, has 50 percent shareholding in Bank One Limited in Mauritius, Prime Bank Limited has 11.24 percent shareholding of First Merchant Bank Limited in Malawi and 11.46 percent shareholding of Capital Bank of Botswana.

On the other hand, Equity Group acquired 79 percent ownership of Pro-Credit Bank in the DRC, with the banks further eyeing the Ethiopian market. Enditem

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