Equity places huge bets on expansion

By Jackson Okoth

Shareholders of Equity Bank Group will receive 40 cents per ordinary share for the year ended December 31.

This is compared to 30 cents per share paid out previously. "We have decided to increase the bank’s retained earnings to fund the bank’s expansion," James Mwangi, Equity Group Chief Executive told shareholders at an Annual General Meeting on Friday at Kenyatta International Conference Centre.

With huge amounts of cash pumped into Southern Sudan and Uganda, where it has opened new branches, Equity is placing huge bets on this expansion to pay off.

Considered a big player in the retail segment, the Group was not spared effects of a slow economy, whose growth dropped to zero per cent in the third quarter of last year.

The group’s pre-tax profits increased marginally from Sh5 billion in 2008 to Sh5.2 billion last year.

"We have had to bear the cost of new investments, including losses in Uganda and Sudan," Dr Mwangi said.

The group’s total expenses increased from Sh7.6 billion in 2008 to Sh10.4 billion last year, pushed up by huge staff costs that increased from Sh2.9 billion to Sh4.3 billion. Its wage bill rose from Sh2.8 billion to Sh4.1 billion in the period under review.

Operations in Uganda

While the Kenya franchise remained profitable, the group’s operations in Uganda made a loss of Sh266 million while Sudan’s subsidiary recorded a Sh43 million loss.

With a footprint in the competitive Uganda market, Equity has already completed conversion of Uganda Microfinance Limited, which it acquired in 2005, into a fully-fledged commercial bank.

"We expect the bank’s profitability, which has had an implications on our performance, to improve," Mwangi said.

Operating in a difficult business environment, the bank has made huge provisions for non-performing loans, which is currently 4.7 per cent (Sh2.8 billion) of its entire loan book.