Equity Group recorded a 14 percent decline in net profit for the nine months period to September 30.
This was largely as a result of rising operational costs, increased provisioning for bad loans and the poor performances of some of its regional subsidiaries as the Covid-19 pandemic wreaked havoc on the banking sector.
The lender, which is listed on the Nairobi Securities Exchange (NSE), made a profit after tax (PAT) of Ksh15 billion compared with Ksh17.5 billion ($175 million) in the same period last year, with the Tanzanian subsidiary yielding to a net loss of Ksh200 million ($2 million) while the Congolese subsidiary’s net profit dropped by 34 percent to Ksh600 million ($6 million).
The group’s loan loss provision jumped 11-fold to Ksh14.3 billion ($143 million) from Ksh1.3 billion ($13 million) during the period under review as the bank moved to cushion against the rising non-performing Loans (NPLs) largely from the SMEs and large corporates
“We are focused on increasing the chances of our customers surviving the Covid-19 challenges, transforming themselves by walking with them and hand-holding them with our knowledge, skills and Group resources. During these extra-ordinary times our performance measures have changed from numbers to lives and livelihoods supported, changed, enhanced and transformed,” said James Mwangi, the group’s Chief Executive in a statement Thursday.
The bank’s subsidiary in South Sudan was mostly impacted with the increased levels of NPLs that stood at a high of 51.5 percent of the total loan book, followed by the Tanzanian subsidiary (37.8 percent), DRC Subsidiary (12 percent), and the newly acquired Banque Commerciale Du Congo (BCDC) had 10.8 percent of its loan book classified as non-performing.
According to the group’s unaudited financial results released Thursday a paltry 45 percent of the total loan book is performing after an equal share (45 percent) of the loan book was impacted by Covid-19 Pandemic while 10 percent of the loan book is non-performing.
The group’s net loans grew 30 percent to Ksh453.9 billion ($4.53 billion) from Ksh348.9 billion ($3.48 billion) while total operating costs surged 52 percent to Ksh44.8 billion ($448 million) from Ksh29.5 billion ($295 million).
Net interest income increased 22 percent to Ksh39.3 billion ($393 million) from Ksh32.3 billion ($323 million) largely due to investment in government securities while non-funded income grew 11 percent to Ksh24.4 billion ($244 million) from Ksh22 billion ($220 million).
Equity, which is headquartered in Kenya, operates five subsidiaries in Uganda, Tanzania, Rwanda, South Sudan and the Democratic Republic of Congo (DRC) and has a commercial representative office in Ethiopia. It has 14 million customers across the region.
During the six months to June 30 this year, Equity Group recorded a 24 percent decline in net profit with loan loss provisioning increasing 15-fold to Ksh7.7 billion ($77 million) from Ksh500 million ($5 million) in the same period last year.
Its profit after tax (PAT) fell to Ksh9.1 billion ($91 million) from Ksh12 billion ($120 million).