FINANCIALS

Equity Bank's Q1 profits dip on provision for high loan loss

Aggressive provisions saw the cost of risk rising to 3.24 per cent up from 0.37 per cent

In Summary
  • The provisions grew tenfold to Sh3billion from Sh300million dropping profits to Sh5.3 billion from Sh6.2 billion recorded in the same period last year.
  • The Group’s total income grew by 13 per cent to Sh19.7 billion up from Sh17.5 billion for the same period last year.
Equity town hall branch.
Equity town hall branch.
Image: FILE

High loan loss provisions saw Equity Group's quarter one net profit dip by 14 percent, according to its financial results.

The provisions grew tenfold to Sh3billion from Sh300million dropping the lender's profits to Sh5.3 billion from Sh6.2 billion recorded in the same period last year.

“Aggressive provisions saw the cost of risk rising to 3.24 per cent up from 0.37 per cent,” Equity said in a statement.

 

The Group however continued to enjoy robust growth with total assets registering a 14 per cent year on year growth to Sh693.2 billion from Sh605.7 billion driven by a 17 per cent growth in customer deposits to Sh499.3 billion from Sh428.5 billion.

Net interest income grew by 11 per cent on the back of a 24 per cent year on year growth on loan book to Sh379.2 billion up from Sh305.5 billion, which reflected strain with the non-performing loan book growing to 10.9 per cent up from 9.1 per cent the previous year.

The Group’s total income grew by 13 per cent to Sh19.7 billion up from Sh17.5 billion for the same period last year.

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

Forex trading income grew by 34 per cent to Sh1.1 billion up from Sh815 million with 26.5 per cent of the volume traded contributed by diaspora flows.

Diaspora remittances commissions grew by 22 per cent to Sh234 million up from Sh192 million the previous year with the volume of diaspora remittances growing by 31 per cent to reach Sh40.6 billion up from Sh30.9 billion.

Merchant banking commission grew by 11 per cent to Sh582 million up from Sh523 million the previous year with Merchant banking volume reaching Sh29 billion up from Sh25.6 billion

 

Branches and ATMs processed only six  per cent of the Group’s banking transactions, while mobile and internet banking processed 79 per cent of all transactions.

High forward-looking loan provision in the wake of Coronavirus has continued to dent banks’ profits in the first three months of the year.

Kenya adopted the International Financial Reporting Standards (IFRS19) accounting standard that requires financial institutions to provide for unforeseen defaults beforehand. 

KCB Group for instance posted a higher provision expense to cover for downgraded facilities, with expected growth in defaults across key sectors of the economy attributable to the pandemic.

 NCBA Bank however reported the highest growth in net profits of 20 per cent but it’s operating expense surged to Sh3.7 billion from Sh3.3 billion on an account of high loan loss provision.