Equity Bank to launch telecoms platform in May

By Jackson Okoth

Kenya: Preparations are in top gear for Equity Bank to unveil a new mobile banking platform that could upset dominant players already calling the shots in this segment.

The move will put it in direct competition with integrated communications company Safaricom Limited-the largest mobile phone operator in the country.

Coming under scrutiny will be both Central Bank of Kenya (CBK) and Communication Commission of Kenya (CCK) on who has overall oversight on Equity Bank, which now has both a banking and telecoms license. Debate has been ongoing on whether the M-Pesa cash transfer service offered by Safaricom is a financial service or telecoms, with the CBK always keeping a close watch.

“We are still doing the simulations and installing the necessary equipment and software that will transfer customers from point of sale terminals to the mobile phone touch screen,” said Dr James Mwangi, Equity Bank Chief Executive Officer.

He made these remarks yesterday in an investor briefing while releasing the bank’s first quarter results 2014- the first bank off the starting blocks this year.

While details of what Equity plans to do with its telecommunications license is still scanty, senior officials at the bank disclosed that their intention is to fully integrate telecoms and financial services.

“The future of financial services the world over is in the mobile phone. This is why we are keen to have this merger between telecoms and financial services, using the license,” said John Staley- Equity Bank Chief Officer in charge of Finance, Innovation and Technology investors yesterday.

Pre-tax profit

Sidestepping minefields in South Sudan as well as a depressed economy in 2013, Equity Bank made a pre-tax profit of Sh5.4 billion for the first quarter of 2014, a 21 per cent increase from Sh4.5 billion.

The bank’s net profit also improved from Sh3.8 billion

Customer deposits grew by 18 per cent to Sh206 billion up from Sh175 billion while customer numbers closed the quarter at 8.7 million.

The bank’s operating income grew to Sh11.14 billion up from Sh10.2 billion while its efficiency levels measured in terms of cost income ratio improved to 48.7 per cent from 50 per cent, driven by reduced cost of risk.

Source of concern

Business in South Sudan remains a major concern for Equity Bank with Dr Mwangi observing that “While the Equatorial region remain stable, uncertainty remains but we hope the situation will change.”

The conflict that broke out in South Sudan on 15th December 2013 has left thousands dead and displaced hundreds of thousands more. Vulnerable populations continue to flee ongoing fighting in South Sudan

The balance sheet grew to Sh300 billion during the quarter while the bank’s total assets grew to Sh295 billion up from Sh252 billion, representing a 17 per cent growth in the balance sheet.

Banking halls

“Handling of cash remains expensive for use and this is why we are encouraging customers to use agent networks or their mobile phones. We are thinking of increasing over the counter charges, to decongest our banking halls,” said Dr Mwangi.

The industry regulator, the Communications Commission of Kenya (CCK) licensed three firms Equity Bank, through its subsidiary Finserve Africa Limited, Zioncell Kenya Limited and Mobile Pay Limited to operate as Mobile Virtual Network Operators (MVNO).

The sector regulator also approved the three companies to piggyback on Airtel infrastructure to launch products and services.