Equity Bank announced its first quarter earnings today, reporting a reduced profits by 5%. In the first quarter of last year’s financial period, the bank reported a pretax profits of shs 5.1 billions, but this quarters profits reduced to shs 4.9 billion, and the bank has gone ahead to blame the interest rates capping law that was enacted in September last year.
Despite the reduction in interest rates as demanded by the interest rates capping law, Equity Bank’s non-performing loans still doubled to 7.1 percent of the total loans, further straining the income the bank generated from loans. To remedy the reliance on loans as the major source of income, Equity CEO James Mwangi said that the bank will off-set the impact of the interest rate capping law by lifting its holding on government securities.
Equity Bank’s reduction in profits comes at a time when the bank is closing some of its branches in South Sudan, with a few of the branches that have been left to operate deciding to adopt a wait and see approach as the insecurity situation in the country continues to be uncertain.
In the meantime, Equitel, the bank’s mobile platform that was set to be an alternative to MPESA for Equity Bank customers, has registered growth both by number of subscribers and transactions that passed through the platform.
Equitel transaction income increased to shs 308.8 million in the first quarter of 2017 from shs 176.9 million that was recorded in a similar period a year earlier, translating to a 75 per cent increase over the period.
Revenues from non-loan products including EazzyPay service, and a suite of other digital banking products contributed in increasing non-funded income to sh 6.3 billion from shs 5.1 billion, a 21 per cent increase over the period.
Equity Group Chief Executive Officer Dr. James Mwangi said that the Bank’s digital banking strategy is now paying off.
“These strategic initiatives have begun to bear fruit in a very strong way,” said Dr. Mwangi while releasing the first quarter results.
Transactions processed through Equitel increased by 57 per cent to stand at shs 71.4 million from shs 45.6 million while the value of transactions increased by 89 per cent to shs 118 billion from shs 62.4 billion.
Overall the Group recorded a Ksh6.9 billion profit before tax in the first three months of the year, a 5 per cent drop from shs 7.3 billion that was posted over a similar period in 2016.