Equity Bank Profit Doubles To KSH 19 Bn On Higher Revenue

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.

Image credit: TechMoran