One of East Africa’s largest banks Equity Bank reported profits of KSH 18.88 billion (USD 170 million) for the June quarter, doubling year-ago profit of KSH 9.16 Bn – as the commercial lender raked in higher revenue and set aside less money for bad loans.
With a customer base of more than 9 million in six East African countries, Equity Bank saw income from its loans rise 18% year-over-year to KSH 18.44 billion. The lender also saw its interest on government securities go up 27% to KSH 11.40 billion — pushing up total interest income 22% to KSH 30 billion.
“The defensive and offensive strategy adopted by the group at the onset of the Covid-19 pandemic has been effective in driving performance,” said James Mwangi, CEO and managing director, Equity Group.
Another positive the bank noted – is that all six countries in which the bank operates has IMF projecting strong GDP growth rates. Kenya is set to grow at 7.6%, Uganda 6.3%, Rwanda 5.7%, South Sudan 5.3%, DRC 3.8% and Tanzania 2.7%.
The bank also saw its deposit base grow year-over-year, resulting in 21% higher interest expense on customer deposits to KSH 6.12 billion. Including interest paid out on deposits from other banks, Equity Bank saw total interest expense rise 20% to KSH 7.83 billion.
With higher revenue offsetting increased expenses, the micro-finance lender turned commercial bank saw net interest income grow 23% to KSH 22.46 billion.
Total non-interest income — including fees and commissions, income on loans and advance, foreign exchange trading income, others — increased 13% to KSH 11.65 billion.
Surprisingly, the bank set aside less money to cover its bad loans, despite a 34% increased in bad loans. Equity bank reduced its loan loss provision to KSH 1.79 billion from KSH 6.72 billion, while its non-performing loans and assets increased 34% to 43.82 billion for the June quarter.
The bank said it has been aggressively provisioning. “Of KSH 171 billion Covid-19 restructured loan book, KSH 162 billion is categorized as performing. This is because loan accounts amounting to KSH 103 billion have resumed repayments and about KSH 6 billion has been fully repaid. Only KSH 64 billion remains under Covid-19 moratorium constituting only 11% of the entire loan book,” said the bank.
The bank said it saw its return on average assets (ROAA) grow to 3.3% in spite of the 50% expansion in total Assets while return on average equity (ROAE) grew to 25% up from 15.4% in spite of 26% growth in shareholders Funds.”The regional approach with Kenya now being only 60% of the group balance sheet mitigates national shocks and sovereign risks,” said the bank.
The bank said covid-19 has acted as a tailwind for customers adopting digital with 97% of the bank’s customers now transacting online on self-service devices and third-party platforms. Equity Bank said the volume of its digital banking transactions were up 58% to 606.9 billion; and in value doubled to KSH 2.5 trillion up from KSH 1.16 trillion for the corresponding period last year.
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