Equity Group Holdings has kicked off the year strongly, posting a 22 per cent growth in net profit to Sh5.9 billion for the first three months of 2018.
Releasing the results for the first quarter ended March 31, 2018, in Nairobi yesterday, Chief Executive James Mwangi said he anticipated a stable business environment in all the six markets the group operated in this year.
“Generally, the East African region has no election in the next three years. We expect a robust environment for our business,” said Mr Mwangi.
At Sh5.9 billion, Equity’s profitability for the quarter under review is more than that of its rival Kenya Commercial Bank (KCB), which posted Sh5.1 billion. Last year, Equity was also ahead in the first quarter, but KCB beat it in full-year earnings.
During the quarter under review, Equity’s total income jumped nine per cent to Sh16.5 billion from Sh15.2 billion posted in the previous quarter even as costs declined by one per cent.
Interest income on loans and advances to customers grew by seven per cent to Sh8.8 billion. Interest on government securities also jumped by 25 per cent to Sh3.7 billion. The two items helped grow interest income by 10 per cent to Sh12.7 billion.
The bank put Sh150.2 billion into government securities, up from Sh113 in the previous quarter. The lender’s total loan book expanded by four per cent to Sh271.1 billion.
Non-interest income grew from Sh6.3 billion to Sh6.7 billion. The growth came from areas such as trade finance, merchant commission, mobile banking commission and bond trading. They all expanded by double-digit percentages.
According to Mwangi, 97 per cent of transactions were on digital channels even though the bank retained its 283 branches. However, in terms of the value of transactions, the branches maintained a huge lead.
Operating expenses reduced from Sh8.31 billion to Sh8.2 billion, supported by a 55 per cent cut in loan loss provisioning to Sh359 million.
“We will see increasingly less provisions in non-performing loans since we have already recognised the potential for future default of new loans to reflect the new (accounting) standard,” said Mwangi.
He explained that the bank had booked Sh9.8 billion as provisions on the Sh265.3 billion loans that were in its books before the onset of the International Financial Reporting Standards (IFRS) 9. However, this only has an impact on capital and not the income statement.
Unlike in the previous International Accounting Standard 37, where banks would wait for loans to go bad before provisioning, IFRS 9 dictates that a provisioning is made once commitment for disbursement has been made.