Equity Bank merges two units in business review

A merger of two departments at Kenya’s biggest bank by customer base —Equity — has left more than 50 employees jobless acting as a stark reminder that the economy may not be out of the woods yet.

People familiar with the matter said between 50 and 70 jobs were declared redundant after the bank merged key departments in a restructuring plan aimed at streamlining its operations.

The bank has dissolved a number of departments and merged others, aiming to reposition its operations in a difficult operating environment. Among those that have been dissolved is Alternative Business Channels headed by Samuel Kimiti who has left after a four year stint, along with his team.

The bank has merged its Marketing, Advocacy and Policy departments headed by the Kenya Vision 2030 architect Wahome Gakuru with that of Product Research and Development that has headed by Mr Henry Karugu. It was not clear who between Dr Gakuru and Mr Karugu is in charge of the merged unit.

Also affected is the treasury and trade finance department which has seen a number of employees within the unit heading home. The fate of Equity Bank’s investment banking arm also remained unknown a month after its managing director Maina Mwangi resigned barely a year after taking charge of the unit.

Equity Bank did not respond to our request for information on the matter. The bank, through its public relations agency Blueprint, said it was not ready to comment on what it termed as “speculation over its future.”

Meanwhile the bank’s share price at the Nairobi Stock Exchange rallied by 9.2 per cent to close Monday’s trading session at Sh15.90, from Sh14.55 on Friday, with 4.8 million shares changing hands.

Equity Bank’s reorganisation plan comes at a time when the bank’s profit making machine has taken a beating replicating the downturn that has dogged the Kenyan economy since 2008 and slowed down the pace of growth across most sectors.

The first signs that Equity Bank’s profit machine was under strain came out in the second half of last year when the bank reported a 0.2 per cent decline in its pre-tax profit to Sh4.3 billion.

At the start of last year, Equity Bank had began feeling the cash flow constraints faced by its customers, many of whose small businesses were hard hit after last year’s post election violence.

While Equity’s flat performance mirrored that of other banks in the sector, the glaring comparison in Equity’s dip in profits was more acute given its past track record of triple digit growth.

As a mass market bank, Equity Bank heavily relies on fees and transaction income from its customers accessing its massive branch network throughout the country.

Last year, the bank announced that its half year profit dropped by 14.72 percent. Net profit for the six-month period dropped to Sh2.09 billion from Sh2.45 billion reported for the first six months of 2008.

Equity Bank is yet to release its full year results but indications from the bank’s quarterly performance last year point to flat growth in 2009 compared to 2008.