Equity Group has posted a 6.6 percent net profit growth in the first quarter ended March to Sh12.3 billion, with performance boosted by higher interest income as well as revenue from fees and commissions.
The lender had recorded a net income of Sh11.5 billion a year earlier. Equity’s non-interest income grew the fastest at 57 percent to reach Sh18 billion, helping lift total operating income to Sh40 billion.
Net interest income meanwhile expanded at a relatively slower pace of 12 percent to Sh21.7 billion as rising interest costs in the period ate into the bank’s net interest margins.
The bank has attributed the higher momentum of non-interest revenues to sustained dividends from business diversification including trade finance-related lending and guarantees.
“Non-funded income continues to grow much faster than interest income and this is the momentum we want to maintain,” Equity’s Managing Director James Mwangi said on Tuesday.
Income from forex trading has also continued anchoring revenue growth for the bank having more than doubled to Sh5.16 billion.
Growth in interest income was firmed up by a balance sheet expansion as the bank’s assets including loans rose to reach the Sh1.53 trillion mark.
Net loans and advances to customers grew by 21 percent to Sh756.3 billion on increased private sector lending while changes to the bank’s investment securities including government bonds increased marginally to Sh392.4 billion from Sh389.4 billion.
The slowdown in the holdings of the fixed income securities aligns with Equity’s plan of shifting its portfolio away from government lending.
Customer deposits were up 23 percent in the three months to stand at Sh1.11 trillion from Sh900.9 billion a year prior.
Equity’s cost base nevertheless partially served to hold back the lender’s profitability as total operating expenses rose by 45 percent to Sh23.1 billion.
This was on the back of higher staff costs and increased loan loss provision among other items.
Provisions for bad debt for instance nearly doubled from Sh1.8 billion to Sh3.4 billion as Equity fully covered the entire Sh3.3 billion loan book it acquired from Spire Bank.
The buyout of the small lender has pushed Equity’s non-performing loan ratio to 9.1 percent from 8.65 percent last year.
Equity says it continues to register increased cost efficiencies from its evolution of online and digital platforms.
“98 percent of all our transactions are happening outside the branch, 96 percent of which are on the third party and self-service platforms, delivering 70 percent of the value of transactions at the bank,” Mr Mwangi said.
Equity is the second largest bank to announce its performance in the first quarter, with lenders generally expected to set new earnings records this year.