Equity staff costs down for the first time since 2010

An Equity agent in Nairobi. The bank is counting on increased agent transactions to cut visits to banking halls and in turn staff costs. FILE 

By DAVID HERBLING
 

 

In Summary

• The lender’s wage bill, including those of its foreign subsidiaries, dropped to Sh1.97bn in quarter one from Sh2bn in a similar period last year.

Equity Bank has for the first time since 2010 reported a drop in employee costs as it eyes agency banking to curb growing costs.

The lender’s wage bill, including those of its foreign subsidiaries, dropped to Sh1.97 billion in quarter one from Sh2 billion in a similar period last year.

Staff costs of its Kenya operations also dropped to Sh1.64 billion compared to last year’s Sh1.78 billion as investments in IT and introduction of agency banking push lenders to trim staff numbers and freeze hiring.

Rapid expansion has seen Equity’s staff numbers increase to 7,060 last year from 4, 386 in 2008, widening its wage bill from Sh2.9 billion to Sh7.17 billion in 2012.

James Mwangi, the CEO of Equity Bank, said in December the bank will not replace the rank and file employees leaving the lender as it eyes agency banking— third party banking transactions away from bank branches — to support its future growth.

“Agency banking has a variable cost. No capex required, no rent, no staff cost, only commissions to agents,” Mr Mwangi said earlier.

Equity had 6, 900 agents in March up from 4, 000 in the same month last year.

The wage bill of most top banks rose by double digits last year in what has seen lenders like Barclays Bank mull over job cuts to protect profits

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The pay increment is linked to a talent war that has seen lenders raise salaries for management and sharp growth in the salaries of non-management staff following negotiations fronted by the Bankers Insurance Finance Union (BIFU).

Kenyan banks’ heavy investment in IT in the last two years has reduced the need for paper work and backroom offices due to automation of branches, rendering a number of workers redundant.

Bankers are betting on the agency business model and technology-based delivery channels such as ATMs, mobile and Internet banking to serve more customers away from banking halls.

This is expected to reduce the role of lower cadre employees such as supervisors, clerical officers and secretaries, who have seen their pay rise by an average of 21 per cent over the past two year, thanks to BIFU.

Equity bank announced a 22 per cent rise in first-quarter net profit helped by cheap deposits and lending income. The low deposit regime has also lifted the earnings of NIC Bank and Housing Finance (see article).

The bank’s net profit stood at Sh3.21 billion in the three months to March compared to Sh2.63 billion in a similar period a year earlier, overtaking KCB on the profit ranking.

Equity’s costs of deposits dropped by Sh470 million in the quarter to Sh720 million despite the lender having gathered an additional Sh20 billion in new savings over the past year. Mr Mwangi said he was upbeat about prospects for the rest of the year after Kenya held peaceful elections in March.