Equity’s plan for HF starts to take shape

HF has branch network of 10 branches which has seen it lose out to other banks in the battle for increasing customer deposits.

Its lending business has also come under threat as other financial institutions race to munch its market share as they seek avenues including the housing loans market to invest the excess cash pile in the hands of commercial banks.

Through Equity Bank’s 155 branches, HF would enjoy a wider distribution network while Equity’s 4.5 million account holders present a wider customer base.

But its through Equity Bank’s lower cost of funds at 2.7 per cent that Mr. Mwangi sees as the clincher for mortgage business in the country.

Should both Equity and HF merge operations, the mortgage lender’s cost of funds at 8.9 per cent is expected to ease downwards, setting the stage for more affordable mortgage financing.

One of Mr. Mwangi’s long term goals has been to venture into low cost mortgage financing based on a similar micro finance model that propelled Equity Bank to continental success.

Analysts foresee that Equity will soon propose a merger of the two banks.

Under a deal like the one pursued by KCB when it merged its S&L division, Equity could possibly fold HF as a department into the group.

Equity at the moment is one of the most well-heeled banks in Kenya with a total capital of Sh22.9 billion.

At this level of capitalisation, it still has room to take on four times more customer deposits than its current level of nearly Sh77.4 billion and grow its loan book by a similar magnitude from the current Sh66 billion.

Regional market

During the first quarter of the year, Equity Bank posted a 43 per cent increase in pre-tax profits from Sh1.2 billion last year to Sh1.7 billion this year.

Marking a return to double digit growth figures, the bank recorded Sh4.65 billion in total operating income compared to Sh3.37 billion within the same period last year.

The bank’s entry and introduction of its banking model into the regional market especially Uganda and Southern Sudan is seen as key in its growth and is poised to pay dividends for the bank.