By James Anyanzwa
Equity Bank’s move to roll out agency banking has started paying off. In its latest financial results covering nine months to September, the bank recorded a 39 per cent increase of the pre-tax profit.
Growth in deposits and loans corroborated the sterling performance that saw pre-tax profit rise from Sh6.46 billion during the corresponding period last year to Sh8.99 billion. Its loan book grew to Sh109.4 billion from Sh70.9 billion, while deposits stood at Sh149.66 billion, up from Sh99.23 billion.
Total interest income rose to Sh13.55 billion from Sh9.88 billion previously. Non-interest income grew 15 per cent to Sh9.34 billion from Sh8.12 billion, while the total operating expenses rose 14 per cent to Sh11.47 billion from Sh10.04 billion.
According to the bank, the number of agents expanded to 2,797 from January’s 875. On the other hand, transactions through this medium rose by 734,000.
"The agency banking is becoming a reality, and it is starting to have a significant impact. The agents are now doing a third of the branches’ transactions. The agency is creating a whole new business for Equity," said James Mwangi, the chief executive officer during an investor briefing on Monday.
Despite the improved performance, Equity’s growth rate in pre-tax profit was slower than the 53 per cent it posted in the first nine months of last year.
Lower costs
However, the improvement was underpinned by lower costs associated with branchless banking, cost savings from automation and more lending to small and medium firms and mortgages.
At the same time, the bank’s management has resolved to leave the lending rates unchanged at between 10 and 13 per cent, despite the Central Bank’s substantial increment of its base lending rate by 400 basis points to 11 per cent.
"We still require loanees to continue servicing their loans at the same rates they have been repaying," said Mwangi. He said although the cost of funds have gone up significantly with interbank rates hovering at 18 per cent, Equity Bank would not pass on the additional costs to borrowers.
"These high interest rates mean depositors are asking for huge amount of funds," said Mwangi, adding that the bank has managed to compensate for the extra costs through reduction in operating costs. The announcement is expected to be a huge sigh of relief to those with running loans, as well as potential borrowers.
