- Equity Group half-year net profit has tumbled by 24.3 percent to Sh9.02 billion.
- Covid-19 forces bank to increase provisioning for loan defaults by nearly nine times following difficulties facing borrowers.
Equity Group #ticker:EQTY half-year net profit has tumbled by 24.3 percent to Sh9.02 billion after the lender increased provisioning for loan defaults by nearly nine times to reflect the Covid-19 triggered economic difficulties facing borrowers.
The lender said on Tuesday that net profit for the six months to June has retreated from Sh11.92 billion posted in a similar period last year.
The fall in profit was despite net interest income growing by 16.9 percent to Sh24.6 billion as the lender’s loan book expanded by Sh70.7 billion or 22 percent to Sh391.6 billion.
Equity increased loan loss provisioning 8.7 times to Sh8.02 billion in contrast with Sh918.5 million that had been made in the preceding similar period.
Gross non-performing loans have risen by Sh16.3 billion or 55.7 percent to Sh45.55 billion, pointing to deterioration in loan book quality in a Covid-19 environment.
Higher loan loss provisioning saw operating expenses jump by 31 percent to Sh27.1 billion to pull down the bottom-line.
Equity becomes the fourth top bank to post a drop in profit, majorly on increased provisioning for bad debts given the economic hardships facing borrowers.
KCB Group #ticker:KCB net earnings tumbled by 40 percent to Sh7.5 billion, while that of Co-operative Bank of Kenya #ticker:COOP fell 3.6 percent to Sh7.3 billion. Stanbic Bank #ticker:SBIC half-year profit dipped by 37.2 percent to Sh2.55 billion.
Equity’s half-year profitability is now the highest in the sector. However, the last time Equity beat KCB in full-year earnings was in 2014.
During the review period, Equity’s non-interest income, mainly earned from fees and commissions, dipped by Sh2.1 billion or 13 percent to Sh14.4 billion.
The drop in non-funded income came on the back of waivers on transfers between banks and mobile wallets such as M-Pesa as Central Bank of Kenya (CBK) moved to lower cash handling in the wake of Covid-19.
Equity Group CEO James Mwangi had in June said the lender was losing Sh120 million per month from the CBK directive.