Equity Group Holdings CEO James Mwangi speaks during an investors
briefing on its 2017 Q3 Financial Results in Nairobi on October 30,
2017. PHOTO | SALATON NJAU | NMG
Equity Bank is looking at its Ugandan subsidiary as its best bet
for growth in the coming years as its Kenyan and other regional markets
slow down due to regulatory interventions, political squabbles and
subdued commodity prices on the global markets.
Equity’s
Ugandan subsidiary posted a 37 per cent jump in profit in the nine
months to end of September, contributing Ksh700 million ($7 million) to
the group’s profit after tax.
The lender on Monday
reported a three per cent drop in after-tax profit up to the third
quarter of its financial year, attributed to lower earnings from
interest income in the home market where rate caps law was introduced in
September 2016.
Group CEO James Mwangi said the
lender plans to invest more in Uganda as the relative political
stability in the landlocked nation and an expected oil boom hold bright
prospects for banking. He did not however disclose the capital injection
budget for the country.
“It (Uganda subsidiary) is not
becoming better than Kenya in size but return on asset and return on
equity is much better. With the hope of oil, it appears that Uganda will
receive about $20.4 billion in the next four years from their oil
industry,” Mr Mwangi said during an investor briefing announcing the
lender’s nine-months performance.
The bank, which is
the largest in Kenya by customer numbers, has fully-owned subsidiaries
in Uganda, Tanzania, Rwanda, South Sudan and the Democratic Republic of
Congo (DRC).
“Uganda is likely to become a very
significant economy in the East African region on account of oil. [It]
has also opted to invest significantly in its infrastructure and doesn’t
have political uncertainty as in Kenya. You may not agree with their
politics but it has no political uncertainty.”
Slow credit growth
The
rates cap has fuelled a slowdown in credit growth to 1.5 per cent in
June this year from a high 8.6 per cent in June 2016. A politically
charged environment this year has also hurt business in Kenya.
The flat profitability is attributable to a drop in interest income on loans.
Equity
Bank grew profit in South Sudan despite political unrest in the
country, something Mr Mwangi attributed to the bank “aligning to the
environment”.
Only its DRC subsidiary posted a 7 per
cent drop in profit after tax to about Sh500 million mainly due to
increased investment in the branch network there and a difficult
business environment occasioned by a political crisis and lower earnings
from copper and cobalt export.
“We have increased the
branches from 11 to 32 and we are now ranked in terms of net worth the
second-largest in DRC,” Mwangi said.
“We see the
political risk as having dissipated and the economic shock having
decreased significantly. We expect a very good year in the coming year.”
-Reporting by Kevin Mwanza.
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