Equity Group’s Profit Tumbles as Provisions at Kenyan Bank Soar

Nairobi (Capital Markets in Africa) — Kenya’s biggest bank by market value boosted provisions for loan losses more than sevenfold in the first quarter as the coronavirus struck East Africa’s largest economy.

Equity Group Holdings increased provisions to 3.12 billion shillings ($29 million) compared with 410 million shillings a year earlier, while the board decided to withdraw its 2019 dividend to conserve cash during the pandemic, the Nairobi-based lender said in a statement on Thursday. First-quarter net income slumped by 14% to 5.28 billion shillings.

The outbreak “has introduced unprecedented uncertainty within the global financial systems, prompting us to adopt a conservative approach — fortifying our balance sheet and assuring ample liquidity to support our customers,” Chief Executive Officer James Mwangi said in the statement. Last week, the lender said it had restructured 92 billion shillings of loans, second only to KCB Group, the nation’s biggest bank by assets.

The group’s business model, which relies on high volumes of low-margin transactions and a low cost of funding, will allow Equity to ride out compression in margins caused by lower interest rates, the CEO said. The lender joins other Kenyan banks in boosting provisions for loan losses with the economy forecast by the government to slow to 2.5% this year from earlier estimates of around 6.2%.

Shares of Equity, which operates in six markets, rose 0.4% to 36 shillings by 9:41 a.m. in Nairobi, paring its decline this year to 33%. That lagged the 3.8% rally in KCB Group on Thursday.

Source: Bloomberg Business News