Equity deposits in first fall since listing

Equity Bank Kenya customer deposits dropped for the first time since going public in the second quarter of 2012 as the cost of funds rose and lending slowed down due to a high-interest rate environment.

The lender said its group customer deposits rose to Sh151.1 billion in the first half of this year from Sh123 billion compared to a similar period last year — but rose by Sh398 million in the three months between April and June.

Equity operates in the East African region.

Kenya’s customer deposits rose by 17.02 per cent to Sh128.2 billion in the first half of this year from Sh109.55 billion against similar period last year but dropped by Sh1.7 billion in the three months between April and June.

James Mwangi, Equity Bank’s CEO, said that customer deposits had slowed down in the first half of the year, an indication that high cost of living had affected savers.

“We see a deposit base that is almost flattening because of the inflation rate,” said Mr Mwangi, arguing that the bank has a positive outlook as the economy looks up.

He said that the bank was expecting stronger economic growth as interest rates and inflation drop, adding that this could boost lending.

Equity saw group interest expenses on deposits jump by more than one and a half times to Sh2.58 billion in the first half of this year from Sh728 million.

About Sh1.39 billion of this was paid between April and June this year and Sh1.32 billion was paid for deposits in Kenya, the largest subsidiary.

The loan book went up by 1.31 per cent to Sh114.33 billion from Sh112.85 billion as at the end of March.

According to disclosures provided by the lender, consumer and micro-enterprise segments bore the brunt of the high interest rates with the former remaining flat at Sh41.06 billion as at the end of June from Sh41 billion as at the end of March and the latter dropping to Sh12.83 billion from Sh13.67 billion.

“All indications are that 2013 will be a slightly better year and we are projecting stronger gross domestic product growth,” said Mr Mwangi.

Standard Investment Bank (SIB) said that deposit growth between quarters was below expectations.

“If you have lending opportunities, you will go and seek deposits but there is no need to go and take up expensive deposits when loan growth is slow,” said Francis Mwangi, a research analyst at SIB.

According to disclosures provided by the lender, as at the end of June Kenya accounted for 85 per cent of the bank’s assets and 87 per cent of total revenue.