Follow

Keep Up to Date with the Most Important News

By pressing the Subscribe button, you confirm that you have read and are agreeing to our Privacy Policy and Terms of Use
Subscribe

Kenya: Equity Group reports 13% drop in 2023 pretax profit

Kenya Equity Group reports 13% drop in 2023 pretax profit Kenya Equity Group reports 13% drop in 2023 pretax profit
Kenya: Equity Group reports 13% drop in 2023 pretax profit

Kenya’s leading lender, Equity Group, has reported a 13% drop in pretax profit for the year 2023. The bank’s profit declined to 51.9 billion shillings ($396 million) due to an increase in provisions for bad debts.

Equity Group raised its loan loss provisions by 139% to 32.8 billion shillings after its gross nonperforming loans nearly doubled.

Despite the decline in pretax profit, Equity Group’s net interest income rose by just over a fifth, indicating growth in its core business. The bank, which operates in Kenya as well as neighbouring markets such as Uganda and Tanzania, continues to maintain a strong position in the East African banking sector.

Kenya Equity Group reports 13% drop in 2023 pretax profit
Equity Group Managing Director and CEO Dr James Mwangi during an investor briefing in Nairobi, Kenya on November 20, 2023.

Equity Group’s Chief Executive Officer, James Mwangi, explained that the bank chose to raise its provisioning in the last quarter of 2023. The decision was influenced by the identification of the real estate, manufacturing, transport, and logistics sectors as the key drivers of nonperforming loans.

Advertisement

Additionally, the bank observed a rise in nonperforming loans from companies waiting for payments from the government, reflecting the impact of pending bills on the wider economy.

Mwangi also highlighted that the bank refrained from adjusting the base interest charge on personal loans that were active as of January 2023. This decision was made despite the Central Bank of Kenya progressively raising its base rate to 12.5% by the end of the year.

Equity Group’s commitment to its customers during a challenging economic environment demonstrates its dedication to providing stability and support.

The decline in pretax profit for Equity Group is a reflection of the tough operating conditions faced by banks in Kenya.

In a recent statement, Mr. Mwangi explained that loans accounted for 32 percent of the bank’s overall loan book. Despite the increase in the cost of funding, the bank chose not to adjust the base rate on personal loans, effectively keeping them at 13 percent.

Kenya Equity Group reports 13% drop in 2023 pretax profit
Kenya: Equity Group reports 13% drop in 2023 pretax profit

However, this decision resulted in the interest income growing at a slower pace compared to interest expenses. Despite this, Equity Bank’s loan book increased by 26 percent to reach Sh887.4 billion, and customer deposits grew by 29 percent to Sh1.36 trillion.

Net interest income also saw a significant rise of 21 percent, reaching Sh104.2 billion, while non-funded income increased by 30 percent to Sh75.9 billion. However, the bank’s costs increased by 57 percent to Sh178.2 billion, primarily due to provisions made for bad loans.

Looking at the performance of its subsidiaries, the Kenyan operation accounted for the majority of non-performing loans (NPLs), reaching 69.6 percent in 2023. It also made the most significant provisions, with its local loss cover increasing from Sh7.84 billion in 2022 to Sh22.98 billion in 2023.

Despite these challenges, the Kenyan subsidiary still contributed significantly to the group’s net profit, totaling Sh26.7 billion, although down from Sh33.4 billion the previous year. On the other hand, the DRC operation saw its contribution rise to Sh12.1 billion from Sh5.8 billion in 2022.

Equity Bank Rwanda also experienced growth, with its contribution increasing to Sh4.2 billion from Sh2.8 billion, partly due to the integration of Cogebanque after Equity Bank’s acquisition of the Rwandan lender in November 2023.

The COVID-19 pandemic and its subsequent impact on the economy have resulted in increased financial challenges for businesses and individuals, leading to an increase in bad debts.


Discover more from Who Owns Africa

Subscribe to get the latest posts to your email.

Add a comment

Leave a Reply

Keep Up to Date with the Most Important News

By pressing the Subscribe button, you confirm that you have read and are agreeing to our Privacy Policy and Terms of Use
Advertisement

Discover more from Who Owns Africa

Subscribe now to keep reading and get access to the full archive.

Continue reading