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Kenya

Equity sees brighter days ahead

NAIROBI, Kenya, May 21- Equity Bank Group has said that it expects its income to increase by approximately Sh200 million every month, once most of its new branches start to break even.

The bank’s Chief Executive Officer James Mwangi told an investor briefing on Thursday that out of their 62 branches, 51 outlets were making losses; a situation which is denying them huge profits.

“The direct loss that we are taking from those branches is Sh150 million every month. If you take the financing cost of the investment, it means that we are taking a hit of over Sh200 million,” he explained, adding that the expenses from these banks were being incurred immediately after opening shop.

Currently, Equity’s total branch network is 102, with 36 located in Uganda. The bank is gearing to set up shop in Sudan.
 
Mr Mwangi added that they were putting in place measures that would see these unprofitable networks reduced to 10 in the fourth quarter of this year.

“We expect the bulk of the profits to come in the second half as opposed to the first half of investment, which are expected to drive future growth,” he envisaged.

The CEO spoke, while releasing the 2009 first quarter results, where he disclosed that they intend to deepen their offing of investment banking services.

In January this year, the bank acquired Juanco Investments in what was interpreted by pundits as a move that would set the stage for the formation of Equity Investment Bank, which would particularly offer financial advisory services and collective investment vehicles.

“We want to tell other investment bankers that we are not going to compete with them. We are going to create an investment bank that will incorporate the services of investment banking at the bottom of the pyramid,” he disclosed.
 
During the briefing, the CEO announced a 26 percent increase in profit after tax of Sh917 million, up from Sh727 million recorded during the corresponding period last year.

He attributed this to the growth of the net interest income, which went up by 89 percent to reach Sh2.1 billion up from Sh1.1 billion.

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“Total operating income rose by 52 percent to reach Sh3.4 billion in the previous year, while deposits grew by 57 percent to close at Sh53.7 billion,” he added.

The bank, Mr Mwangi said, was well capitalised and had maintained high liquidity levels to close the quarter at 40 percent against the statutory minimum of 20 percent.

This, he boasted, put the bank at a solid position that would help it withstand any shock that may arise due to the ongoing global economic slump.

“We are well placed to continue with our vision of being the champions for the social economic prosperity of the people of Africa,” he concluded.

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