NAIROBI, Kenya, Jul 25 – Equity Bank carried on the momentum witnessed in the financial services sector in 2010 by posting a 57 percent growth in net income for the six months through to June 2011.
The Sh4.74 billion compares to the Sh3 billion posted by the bank during the corresponding period in 2010 mainly driven by growth in the bank’s loan book.
Briefing investors on Monday, Equity Bank Chief Executive Officer James Mwangi said loans and advances grew by 43 percent from Sh68.25 billion to Sh97.7 billion. Government securities grew by a marginal four percent to Sh27.46 billion.
This saw net interest income climb by 26 percent to Sh6.97 billion.
“We shifted our strategy from last year to lending from government securities because we saw the low interest rates at that time were not sustainable,” Mr Mwangi said.
The country has experienced rising inflation since January, which has seen the Central Bank tighten monetary policy by hiking its base lending rate to 6.25 percent. A number of banks have reacted by also hiking their interest rates on loans.
Mr Mwangi was however categorical that Equity Bank would not be raising its interest rates in the short term especially for its segmented products.
“For our products for farmers, women groups the youth and such like we have no intention of raising this at all,” he said.
During the six months, the bank’s customer base grew by 28 percent to 6.3 million customers from 4.96 million, making it the biggest bank by customer numbers. This had positive effect on deposits that grew by 40 percent to Sh130 billion.
Total operating income for the period grew by 30 percent to Sh13.1 billion as operating expenses grew by 17 percent to 7.3 billion.
Shareholders’ funds grew by 13 percent to Sh29 billion and earnings per share climbed 57 percent to Sh2.56.
The bank’s ability to attract new customers was due to its increased efficiency and innovation on the delivery channels through agency banking and mobile banking. Mr Mwangi said the bank had 2,300 licensed agents handling over 25,000 cash transactions a day.
“People underestimate the fact that the cost of accessing financial services is what has kept people un-banked, so we are removing barriers. I wouldn’t be surprised if they started handling 50 percent of our transactions,” he said.
Equity bank is currently working on franchising its agency model and is in talks with CBK to get authorisation to allow agents to process loans and offer insurance products.
The CEO also told investors the bank would be opening subsidiaries in Rwanda (10 branches) and Tanzania (five branches) from August. For Rwanda, Equity has also been licensed to offer agency banking facilities as well as mobile banking.
Mr Mwangi said subsidiaries in Uganda and Southern Sudan had both broken even and were now profitable adding he expects the same in the two new markets.
“We are very optimistic because of the lessons we have learnt already that we will perform much better,” he said.
Despite the economic uncertainties being experienced in the country, Mr Mwangi expects full year performance to be better than that in 2010. Equity Bank posted Sh9.04 billion pre-tax profit in 2010.