Equity Bank Kenya reported a 20 per cent drop in earnings for the first nine months of the year, attributed to rising non-performing loans.
According to the Group's financial results released Monday, the bank's profit after tax declined to Sh19.3 billion, slowing the overall growth of the Group which rose to five per cent to Sh36.2 billion.
The unit last reported a drop in profit in 2016 when the government capped interest rates at four per cent above the base-lending rate.
Equity Bank Group chief executive James Mwangi said the bank cared more for the struggling borrowers than its profits in the period under review.
"We decided to choose the customer over profit,'' Mwangi told investors.
While the Kenyan unit that accounts for the largest part of the business struggled, subsidiaries in the neighbouring states recorded over 100 per cent growth in earnings cutting Kenya's dominance.
Equity Bank Kenya compared to other subsidiaries is now on a 50:50 split on Profit After Tax (PAT); at the Profit Before Tax (PBT) level it's a 46:54 split.
Equity BCDC (DRC subsidiary) posted 142 per cent net profit growth to Sh11.4 billion while the Tanzania subsidiary posted 136 per cent growth in net earnings.
The performance of the Kenya operations resonates with the current state of the economy in the country, which continues to see both businesses and households struggle.
This has seen the cost of borrowing rise as the government pushes up base lending rates to manage the rising cost of living and cater to the shilling that has devalued major international peers.
Inflation - a measure of the cost of living over the past 12 months - rose for the first time in five months to 6.9 per cent in October from 6.8 per cent a month earlier. This was the first increase since eight per cent in May.
The shilling on the other hand continued with its depreciating trend, closing the day at Sh152.33 according to the Central Bank of Kenya and an average of 156 units against the greenback in the parallel market.
Latest data from the Central Bank of Kenya (CBK) show that the stock of non-performing loans (NPLs) in Kenya surged to a 16-year high of 15 percent in August, up from 14.5 per cent in July.
This translates to more than Sh596 billion, worked as a share of the total loan book.
"We loan mostly to businesses. We don't give credit to gamblers. The business environment is tough. We promise to continue supporting our customers,'' Mwangi said.
Although the lender had forecasted a 10 to 12 percent average loan default rate for the group during the period, it had to revise it to up to 13 per cent.
Even so, borrowers in Kenya defaulted at the rate of the country's industry average of 15 per cent, necessitating a 107 per cent growth in loan loss provisions.
The lender has to set aside Sh17.7 billion to cover loan default risk up from Sh8.6 billion in the corresponding quarter last year, pushing up the overall operation cost by 47 per cent to Sh45.9 billion.
The Group's books remained positive despite the slight growth in net earnings.
The bank's total assets grew 24 percent to Sh1.69 trillion from Sh1.4 trillion in a similar period last year.
Net loans also rose by 26 per cent to Sh845.9 billion, investments in government papers rose 21 per cent to Sh445.2 billion while cash at hand also rose by 24 per cent to Sh262.7 billion.
The Group's loan book for the period under review rose by 41 per cent to Sh214 billion up from Sh152 billion in Q3, 2022.
This has assured investors of at least four per cent growth in their earnings, with a single share earning Sh9.20 up from Sh8.80n last year.