Equity Bank Group’s #ticker:EQTY growing earnings from remittances raises its creditworthiness and places the institution ahead of its regional competitors, rating agency Moody’s has said.
While stressing that it was not a new rating per se, the agency said the remittances growth by 28 per cent to Sh102 billion was well ahead of the average for the entire industry that saw an upward change of only four per cent.
“Equity Group Holdings (EGH) reported that diaspora remittances increased 28 per cent during the first nine months of 2019, versus the same period last year… well above the four per cent increase for the Kenyan banking system and reflects the bank's growing market share in remittances, a credit positive,” said Moody’s. The income in 2018 was three times that of the previous year because the company had benefited from repatriation of cash stashed abroad following the amnesty by the Treasury in 2016. Though the growth this year was 28 per cent, it was a slowdown from last year.
“The primary driver for increased remittances in the past has been the tax amnesty on the repatriation of funds, which the government initiated in 2016 and ended in June 2019,” said Moody’s.
Currently, the institution’s remittances income remained small as a fraction of the total at 1.1 per cent but it is a strong source of foreign exchange income supporting the bank’s foreign exchange deposits and its ability to lend in foreign currency – normally a major area of income generation because of demand from importers and supply from exporters.
The remittances were also nearly half of the entire amount posted during the nine-month period for the industry — making it one of its growth segments.
“EGH's continued growth in diaspora remittances indicates gains in its remittance market share: EGH controls close to 50 per cent of the country's total remittances,” said Moody’s, adding that it showed the tie-ups with global money remittance channels had worked.
“The bank's success reflects its innovative financial technology and partnerships with international money remittance servicers, which have increased money transfer options, improved ease of transfers and lowered their cost,” said Moody’s.