Equity Bank made a profit after tax of Sh34.4 billion in the first nine months of this year on the back of growth in non-funded income.
This was a growth of 28 per cent compared to the Sh26.9 billion that the lender made in the third quarter of 2021.
Non-funded income, which includes fees and commissions, grew faster than all other revenue streams, with Group Chief Executive James Mwangi attributing this to the impressive performance of trade finance.
"We can be excused and understood, hopefully, if we call ourselves the trade finance bank of the region," said Mr Mwangi during an investor briefing in Nairobi yesterday.
Non-funded income grew by 31 per cent in the third quarter of 2022, faster than the loan interest (20 per cent), or even gross interest income.
Consequently, the contribution of non-funded income to the bank's total revenues increased to 41 per cent. The bank's objective, Mwangi said, is to grow non-funded income because analysts and investors place a premium on it.
The largest component of non-funded income was trade finance, which includes products and instruments used to facilitate international trade.
Trade finance revenue grew by 60 per cent to Sh3.9 billion, up from Sh2.5 billion. Equity, now the most profitable bank in the region, grew its revenue to Sh102.1 billion.
Earnings from loans, or net interest income, grew by 23.3 per cent to Sh59.8 billion from Sh48.5 billion in the same period last year.
Mr Mwangi also noted that loans were growing faster, at 21 per cent than deposits, with the bank's loan book valued at Sh673.9 billion by the end of September this year.
Most of the loans, Mr Mwangi said, were trade finance lending, with the bank keen to exploit the cross-border trade given its presence in six countries.
However, Equity, which is listed on the Nairobi Securities Exchange, was able to achieve yet another milestone after its deposits crossed the Sh1 trillion mark.
On interest income, government securities took up 32 per cent, a boost for the bank as it does not need to provision for it at any given time. Subsidiaries contribute 34 per cent of the profit of the group.
With the end of the Covid-19 pandemic, Mr Mwangi noted that the bank will no longer park money in government treasury bonds. "We have gone back to the market. We want to stimulate the market. "
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However, the bank's non-performing loans (NPLs) as a fraction of total loans increased from 8.5 per cent to nine per cent.
The bank, however, is not worried about it, with the CEO noting that the entire loan book is fully provided for through cash provisions plus guarantees.
The growth in NPLs was attributed to the downgrading of some Sh2.7 billion in loans whose repayments were rescheduled to the fourth quarter.
"That explains why the NPL went up and also the cost of risk went up," said Mr Mwangi.