Equity Bank Profit Dips 14.1pc on Bad Loans to KSh5.2bn

Equity Bank half-year profit hits record Sh17.9bn

Equity Group CEO and Managing Director Dr. James Mwangi

Equity Bank Group announced a  14.1 percent dip in its first-quarter Earnings Per Share (EPS) to Ksh 1.41.

The country’s largest bank by customer numbers attributed the drop in profitability to increase in loan loss provisions resulting to Profit before provisions up by 10 percent to Ksh 10 billion from Ksh 9.1 billion the previous year.

However, the Group increased its loan loss provision tenfold to Ksh 3 billion from Ksh 300 million the previous year leading to a decline of profit after tax by 14 percent from Ksh 6.2 billion to 5.3 billion for the same period last year.

“The global COVID-19 pandemic has mutated into a global economic crisis, occasioned by a sudden standstill of economic activity as a result of the global lockdown. This has introduced unprecedented uncertainty within the global financial systems prompting us to adopt a conservative approach – fortifying our balance sheet and assuring ample liquidity to support our customers,” Dr. James Mwangi, Group Managing Director and CEO said.

As a result, the Board of Directors withdrew its recommendation of a Kshs. 9.5 billion dividends pay out to its shareholders for the 2019 financial year.

“A strong capital and liquidity position give us the strength and capacity to cushion our business against external shocks and accommodate and walk with our customers during these challenging times,” said Dr. James Mwangi.

He added that Equity has restructured customers’ loans of up to Kshs. 92 billion for up to three years as an economic relief effort to the COVID-19 crisis.

The Group continued to enjoy robust growth with total assets registering a 14% year on year growth to Kshs. 693.2 billion from Kshs. 605.7 billion driven by a 17% growth in customer deposits to Kshs. 499.3 billion from Kshs. 428.5 billion.

Net interest income grew by 11% on the back of a 24% year on year growth on loan book to Kshs. 379.2 billion up from Kshs. 305.5 billion, which reflected strain with the non-performing loan book growing to 10.9% up from 9.1% the previous year. Aggressive provisions saw the cost of risk rising to 3.24% up from 0.37%.

Total income grew by 13% to Kshs. 19.7 billion up from Kshs. 17.5 billion for the same period last year. 

Non-funded income grew by 16% outpacing the 11% growth on net interest income thereby increasing its contribution to 42% of the Group’s total income. 

Forex trading income grew by 34% to Kshs. 1.1 billion up from Kshs. 815 million with 26.5% of the volume traded contributed by diaspora flows. 

Diaspora remittances commissions grew by 22% to Kshs. 234 million up from Kshs. 192 million the previous year with the volume of diaspora remittances growing by 31% to reach Kshs. 40.6 billion up from Kshs. 30.9 billion the previous year. 

Merchant banking commission grew by 11% to Kshs. 582 million up from Kshs. 523 million the previous year with Merchant banking volume reaching Kshs. 29 billion up from Kshs. 25.6 billion.

The Group continues to make social and impact investments to support society and build brand love under a shared prosperity business model. To date, the Group together with its development partners have invested US $433 million in education scholarships, agriculture transformation, health, energy, leadership development and business services along with capacity development for micro, small and medium enterprises and entrepreneurs.

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“The withdrawal of the dividend was a shocker to investors, but given the performance of 1Q20, we see the need for building its capital buffers as the economy struggles under the pandemic,” Genghis Capital Equity Group Holdings Plc (NSE: EQTY) 1Q20 Earnings Note.