Equity Bank Group C.EO James Mwangi-FILE
BY UPESINEWS BUSINESS DESK,NAIROBI,25TH MAY 2017-Equity Bank has recorded a 6.1 per cent drop in net profit for the three months to March 2017, joining lenders that are counting the cost of reduced interest income on customer loans following rate caps.
The bank’s net profit for the first quarter stood at Sh4.83 billion, compared with Sh5.13 billion in the first quarter of last year.
Equity Bank Group chief executive officer James Mwangi attributed the fall in profit to a tough operating environment, citing the rate caps on customer loans.
The top-tier lender recorded a 5 per cent or Sh13.1billion drop in its loan book to Sh261.8 billion during the quarter.
Equity’s net interest income from customer loans shrunk by 37.1per cent to Sh8.1 billion in the period.
“A cautious approach in credit underwriting because of inability to price risk saw the loan book decline by 5 per cent from Sh275 billion to Sh262 billion,” said Mr Mwangi Thursday at an investor briefing.
Mr Mwangi said the lender will divert more funds to treasury bills going forward as it considers government debt less risky and more profitable in the wake of the rate capping law even as he exuded confidence the law would “soon” be amended.
During the quarter, Equity Bank ramped up its purchase of government debt which paid off as interest earnings from government securities rose by 56.7 per cent to Sh2.96 billion.
Mr Mwangi added the lender will shift its focus to non-interest income to cushion itself from the reduced interest income as a result of the rate cap.
The BANKS’s non-interest income went up 17.6 per cent went up to Sh6.3 billion helping it mitigate a revenue decline.
The lender’s loan loss provisions however increased 11.5 per cent to Sh796.9 million in the quarter with its non-performing loan portfolio rising by 44 per cent to Sh19.5 billion in the period.
Its interest expenses went up 5 per cent to Sh2.57 billion