Equity’s profit declines 14pc on rising defaults

An Equity Bank branch in Kibra, Nairobi.

Dennis Onsongo | Nation Media Group

By  Otiayo Guguyu

Nation Media Group

What you need to know:

• Loans grew 30 percent from Sh348.9 billion in the third quarter last year to Sh453.8 billion by September this year.
• The lender’s loan loss provision jumped from Sh1.3 billion to Sh14.3 billion compared to the same period last year.

Equity Group profit declined 13.9 per cent to Sh15 billion in the nine months to September from Sh17.4 billion last year after the lender increased its loan book provision 11-fold.

The lender’s loan loss provision jumped from Sh1.3 billion to Sh14.3 billion compared to the same period last year.

Bad loans at the bank group rose 69.4 percent from Sh30.5 billion to Sh51.7 billion signalling the strain among customers to meet loan repayments during the coronavirus scourge.

Equity Bank Group chief executive James Mwangi said the move was a conservative strategy in recognition of the challenging operating environment and a shift of focus to helping their customers survive Covid.

“We are focused on increasing the chances of our customers surviving the Covid-19 challenges, transforming themselves by walking with them and hand-holding them with our knowledge, skills and group resources. During these extra-ordinary times our performance measures have changed from numbers to lives and livelihoods supported, changed, enhanced and transformed,” said Mwangi.

The impact of coronavirus has hit bank profits with industry wide increase in defaults and loan restructuring which are expected to persist into next year.

Non-performing loans

According to the Central Bank of Kenya the ratio of gross non-performing loans (NPLs) to gross loans stood at 13.6 percent in August, compared to 13.1 percent in June.

CBK said a total of loans amounting to Sh1.12 trillion have been restructured (38 percent of the total banking sector loan book of Sh2.9 trillion) by the end of August.

Equity said despite the rise in dud loans and elevated risk, it continued to lend with a bias towards manufacturing of PPE’s, logistics, online businesses, agro- processing, fast moving consumer goods and agriculture value chains.

Loans grew 30 percent from Sh348.9 billion in the third quarter last year to Sh453.8 billion by September this year.

“We grew our loan book by 30 per cent year on year in order to support our customers who saw opportunities of green shoots and diversification in the Covid-19 environment,” Mwangi said yesterday.

dguguyu@ke.nationmedia.com