COVID EFFECTS

Equity Bank's profits dip 24% on high loan provision

Non-funded income declined marginally from Sh14.5 billion to Sh14.1 billion as a result of the waiver of mobile transaction fees in Keny

In Summary
  • Loan loss provision grew 15 times in recognition of portfolio risk associated with the adverse disruption of COVID-19 
  • Topline net interest income was up 17 per cent to Sh24.6 billion up from Sh21.1 billion the previous year
Equity Bank CEO James Mwangi
Equity Bank CEO James Mwangi
Image: FILE

Equity Bank’s half-year profits dropped 24 per cent to Sh9.1 billion compared to a similar period last year on high loan provision, which grew 15 folds due to coronavirus effects on the economy.

According to the financial results unveiled virtually, the lender’s operational costs grew 44 per cent to Sh26.7 billion up from Sh18.6 billion the same period last year, with loan loss provision rising to Sh7.7 billion up from Sh500 million last year.

''Loan loss provision grew 15 times in recognition of portfolio risk associated with the adverse disruption of COVID-19 health pandemic control, management and containment measures and resultant economic shocks and disruptions of supply chains by economic lockdowns,’’ Equity Group MD James Mwangi said.

 

He added that despite non-performing loans showing a minimal decline from 10.9 per cent to 10.7per cent quarter on quarter basis and stabilizing below the 13.1 per cent industry average, prudence dictated that they adopt a conservative humble approach in recognising the risk of uncertainty Covid-19 has imposed on the operating environment

Topline net interest income was up 17 per cent to Sh24.6 billion up from Sh21.1 billion the previous year was driven by a 22 per cent growth in loan book from Sh320.9 billion to Sh391.6 billion.

Non-funded income declined by marginally from Sh14.5 billion to Sh14.1 billion as a result of the waiver of mobile transaction fees in Kenya since April 2020 to drive behavior change towards virtual banking enabled by mobile technology, and lower transactional activity gave weak economic activity.

Customers shied from the use of Merchant Banking and Agency Banking as transactional channels with merchant transactions stagnating as commissions declined by 10 per cent from Sh103.3 million to Sh93.3 million.

Agency cash-out transaction volume declined by 20 per cent from Sh54 billion to Sh42.9 billion with resultant commission declining by 25 per cent from Sh1.055 billion to Sh789 million.

Even so, retail digital commerce payments Eazzy Pay and Pay with Equity recorded 49 per cent growth in a cumulative number of transactions from 1.152 million to 1.719 million transactions as value of transactions grew by 52 per cent to reach Sh9.8 billion up from Sh6.4 billion.

The group’s balance sheet grew by 17 per cent from Sh638.7 billion to Sh746.5 billion driven by 19 per cent growth in customer deposits to Sh543.9 billion from Sh458.6, funding that was deployed to grow loans to customers by 22 per cent and investment in Government securities by 20 per cent.

Regional subsidiaries grew faster increasing their contribution to the Group profitability to 28 per cent up from 26 percent the same period the previous year.

Post balance sheet date, the Group completed the acquisition of 66.53 per cent of BCDC the second largest bank in DRC paving way for the Group to achieve a systemic position after merger and amalgamation of the two subsidiaries in DRC.