Corporate News
Equity Bank chief executive officer James Mwangi. PHOTO | SALATON NJAU
By GEORGE NGIGI, gngigi@ke.nationmedia.com
In Summary
- Equity Bank said 81 per cent of its loans are now being disbursed through Equitel, allowing it to cut stationary and staff costs.
- The lender said it has issued two million Equitel sim cards of which 90 per cent are activated.
- Equity’s loan book grew to Sh275 billion in the first quarter compared to Sh224 billion in March last year while customer savings rose to Sh299 billion from Sh276 billion a year earlier.
Equity Bank
on Tuesday reported a more than doubling of loans disbursed through
its mobile money platform, Equitel, to Sh14.1 billion and a 20 per cent
increase in its first quarter profits to Sh5.1 billion.
The bank said 81 per cent of its loans are now being
disbursed through the mobile platform, allowing it to cut stationary and
staff costs.
“We have issued two million Equitel sim cards of
which 90 per cent are activated,” the bank’s chief executive, James
Mwangi, said.
The steep increase in the volume of loans disbursed
through the phone also benefited from the fact that the average size of
loan disbursed through Equitel grew to Sh42,000 from Sh7,000 in
December.
Equity’s loan book grew to Sh275 billion in the
first quarter compared to Sh224 billion in March last year while
customer savings rose to Sh299 billion from Sh276 billion a year
earlier.
Mr Mwangi, however, disclosed that Equity cut back
on take up of fixed deposits after it tapped into cheap funding from the
international market during the Global Entrepreneurship Summit last
year.
The bank received Sh20 billion at an average four per cent per annum compared to average fixed deposit rate of 7.5 per cent.
Cheaper funding saw the bank’s net interest income
grow 37 per cent to Sh10.4 billion while interest from government
security rose to Sh1.2 billion, reflecting the change in strategy that
has seen the bank increase its lending to the Treasury.
Equity held Sh62 billion in government securities
as at end of March up from Sh42.7 billion in December and Mr Mwangi said
the bank invested an additional Sh20 billion in April.
Lending to government, which offers a lower return
than loans to private borrowers, is usually an indication of reduced
appetite for risk in the productive sectors of the economy.
Mr Mwangi argued that the lending to government did
not mean lack of opportunity in the private sector, but a conservative
approach that is meant to avoid defaults while utilising idle cash in
its books.
Equity’s cash holdings dropped to Sh48.3 billion
from Sh62 billion last year, a development Mr Mwangi attributed to
growth of agency banking that enables agents to use own balances to
serve the bank’s customers.
Increased lending to government, however, hit the
bank’s balance sheet as it was forced to book revaluation losses of
Sh8.4 billion associated with change in prices of Treasury bills and
bonds available for sale to the bank.
The results also show that Equity relied on
improved performance of its Kenyan operation to wipe off a 45 per cent
drop in earnings from its regional subsidiaries
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