Cash from abroad boosts Equity's third quarter profit
Equity Bank has posted an eight per cent increase in net profits attributed to diversifying income streams including remittances from abroad.
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Profit rose to Sh15.8 billion in the nine months to September from Sh14.6 billion recorded last year.
The lender focused on getting money outside the limited credit market following the retention of the rate cap and move by the Central Bank of Kenya (CBK) to cut the benchmark lending rate twice during the nine-month period.
CBK lowered the rate twice from 10 per cent to 9.5 per cent and to nine per cent, effectively capping interest on loans at no more than 13 per cent.
“The operating environment in the last nine months was characterised by volatility in the business environment resulting in elevated inflation, continued interest rate capping causing a credit crunch, and a lowered Central Bank Rate which dipped the yield on loans,” said Equity Group Chief Executive James Mwangi.
Non-funded income hit Sh19.8 billion, driven mainly by remittance commissions, trade finance, agency and credit card fees and commissions.
Diaspora remittances grew by 282 per cent to Sh57 billion from Sh15 billion year-on-year due to partnerships with payment partners including PayPal, Equity Direct, Western Union, MoneyGram, Wave and Swift.
The lender also increased its lending to the State with investment in Government securities rising to Sh125.3 billion in the nine months from Sh109.5 billion last year.
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Coupled with other securities, income from Treasury operations increased by 18 per cent to Sh15.7 billion from Sh13.2 billion in a similar period last year.
“The Equity Group business model has proven that the group is not dependent only on the loan book income to drive shareholder value,” Mr Mwangi said.
The bank also focused on cutting costs while subsidiaries increased contribution to net profit from 14 per cent to 19 per cent.
“The strategy of re-inventing the branches as relationship and wealth creation centres for our SMEs, corporates and high net worth individuals saw transaction value grow to Sh11.07 billion from Sh11.06 billion, while transaction volumes declined from Sh14.4 million to Sh13.5 million as customers preferred to transact on the self-service channels,” said the CEO.