NAIROBI, Kenya, Feb 18 – Equity bank has announced a 22 percent increase in after tax profit to Sh4.56 billion for the year ended December 31, 2009.
The performance of the group which includes the Southern Sudan and Uganda operations however only managed to register an 8.2 percent growth in profit after tax to Sh4.2 billion as these investments have not started contributing to the bottom line.
“Inbuilt in these results is a loss of about Sh1billion, which includes Sh400 million from Uganda, Sh70 million from Southern Sudan and about Sh400 million from the new Kenyan branches,” Chief Executive Officer James Mwangi explained while expressing confidence that their operations would break even by June.
Another loss of Sh70 million was also accrued from the bank’s investment arm, which it brought into its fold with the acquisition of little-known Juanco Investments last year.
During the period under review, the bank adopted a growth-focused strategy that saw it invest Sh12 billion in new infrastructure and expansion. The branch network in the region now stands at 155 while the Automated Teller Machines number 512.
Mr Mwangi said despite the challenging operating environment, the strategy helped to drive the group’s growth which saw the loan book close at Sh63.4 billion while customer deposit accounts also went up to 4.3 million.
“The focus was in inventing and securing the future. To achieve that, the strategy leveraged on the huge capital base to enhance present and future earnings growth,” he added. The board of directors recommended a dividend payout of Sh0.40 per share.
During the year, the bank managed to grow its asset base to over Sh100 billion making it among the few firms in the Kenya to have hit this mark.
Out of this, Sh30billion came from long term funding which the CEO said had enabled them to lend to Small and Medium Enterprises players. Through their ‘Kilimo na Biashara’ product for instance, they released nearly Sh900 million to support farmers while Sh5 billion and Sh1.2 billion went to 100,000 women and youth respectively.
“The bank is in the agriculture sector for the long haul because that is the main GDP contributor in the country, so it’s a sector that you cannot ignore,” he said adding that they had had to introduce innovative and creative means of ensuring that stakeholders in the industry get access to the funds.
One such method was the adoption of branchless banking which Mr Mwangi said they welcome and which has seen them partner with telecommunication service provider Safaricom through which they can use its money transfer service, M-PESA to deliver services to its customers.
He added that this would translate into lower transaction costs for customers while the bank would also see its operating costs significantly reduced as they would not have to put up physically branches.
“We are seeing the agency model as a solution to bringing convenience to our 4.3 million customers. We can now go to every village and appoint retail shops to be an agent doing withdrawals, deposits, account opening even custodial services,” he said adding that this would boost the bank’s growth.