Equity Group’s net profit grew 33.7 percent in the first quarter ended March largely on the back of higher interest income.
The bank reported a net income of Sh11.5 billion in the review period, up from Sh8.6 billion a year earlier.
Total interest income climbed 31.1 percent to Sh26.6 billion as both the loan book and investment in government debt securities expanded.
The bank’s lending to customers rose 27.8 percent to Sh623.5 billion while its holdings of government bonds and T-bills increased by a similar margin to Sh233.9 billion.
Non-interest revenue — largely generated from fees and commissions — rose 9.67 percent to Sh11.91 billion.
The lender’s ratio of non-performing loans contracted to 8.6 percent at the end of the quarter from 11.3 percent a year ago, levels below the industry’s average of 14 percent recorded in February.
“The non-performing loan is at a good place. Our credit team is managing our loan book very well. That gives us the confidence that we can grow the loan book,” Equity Group chief executive James Mwangi told an investor briefing in Nairobi on Thursday.
“When you see our loan book growing very fast, it’s simply because we have confidence in the way it’s being managed.”
The provisions against bad debt in the period stood at Sh1.81 billion, rising from Sh1.27 billion the year before.
Equity’s increased interest income strengthened the lender’s total operating income for the first quarter of the year by 21.74 percent to Sh31.27 billion.
Operating costs on the other hand increased 14.35 percent to Sh15.98 billion.
Equity’s subsidiaries in Tanzania, Rwanda, Uganda and Democratic Republic of Congo accounted for a third (Sh3.6 billion) of the lender’s bottom line compared with Sh1.9 billion, or 21 percent, a year earlier.
The regional subsidiaries contributed Sh12.8 billion, or about 40 percent, of the group’s total revenue compared with Sh9.6 billion, or 37 percent, in a similar period last year.
Equity acquired Banque Commerciale Du Congo and merged it with Equity Bank Congo early last year, leading to one-off costs for paying off 31 staff at the management level to avoid duplication of roles.
“We are diversifying in a fast-growing region and that’s why that trend [growth in contribution to group’s earnings by subsidiaries] is enhanced,” said Mr Mwangi.
During the January-March period, Equity’s balance sheet expanded 19.04 percent year-on-year to Sh1.27 trillion, while customer deposits rose 14.05 percent to Sh900.92 billion.
Equity’s performance is a signal that Kenyan banks could set new earnings records this year after bumper profits last year attributed to the recovery of the economy from the Covid-19 pandemic.
Infections and deaths from the respiratory disease have slowed down globally, leading to the easing of travel and other restrictions. This has revived economic activities and brightened the outlook, with banks benefitting from improved loan repayments.
Borrowers, for instance, have resumed normal payments on 90 percent of the Sh1.6 trillion loans that were restructured in the wake of the pandemic in early 2020.
This has eased pressure on the lender’s capital besides boosting their earnings.
The upcoming general election and Russia’s invasion of Ukraine are seen as significant risks to the economic growth momentum.