NAIROBI, Kenya, May 26 – Equity Group has announced a Sh4.9 billion net profit for the first quarter 2017, a 5.5 percent drop from the Sh5.1 billion the group recorded same period in 2016.
Group Chief Executive Dr. James Mwangi says the drop is a result of an increasingly volatile macro environment that includes prolonged drought, inflation and a contraction in loan growth among other challenges.
The Group’s loan book declined by 5 percent to Sh262 billion, from Sh275 billion owing to a cautious approach in credit underwriting partly due to the capping of interest rates.
“The increase in funding was invested in government securities which on a risk-adjusted basis currently yields similarly to loans and yielded about 12 percent. Government securities grew by 81 percent from Sh62 billion to Sh113 billion with the highest growth experienced in Keny,” Dr Mwangi said during the investor meeting Thursday.
Net interest income additionally declined by 11 percent to hit Sh11.5 billion from Sh12.9 billion due to the shift in government securities portfolio.
Other challenges that continued to face the industry included a low public confidence in the sector, which Dr Mwangi said could be traced back to the receiverships of Chase Bank and Imperial Bank.
Additionally, the erosion of banking stock value at the NSE was also an issue to contend with.
“Activities in the global arena which include the increase in interest rates in the US also affected the sector macro environment.”
Equity’s regional banking subsidiaries made substantial contributions into the Group’s profits from 5 percent to 10 percent. Broken down, Uganda’s profits grew by 194 percent, DR Congo’s by 182 percent, Rwanda’s by 117 percent and Tanzania’s by 45 percent.
Mobile banking transactions grew by 75 percent to Sh308.8 million up from Sh176.9 million. Trade finance increased by 78 percent to Sh282.8 million, while diaspora remittances grew by 79 percent to Sh130.1 million.