Home Banking Equity lends Sh146bn in six months on post covid loan appetite

Equity lends Sh146bn in six months on post covid loan appetite

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Equity Group CEO James Mwangi (left) and Equity Bank Kenya Managing Director, Gerald Warui (right), during the Group’s 2022 Half Year Investor Briefing.
Equity Group CEO James Mwangi (left) and Equity Bank Kenya Managing Director, Gerald Warui (right), during the Group’s 2022 Half Year Investor Briefing.

GROWTH

The high appetite for credit by businesses seeking to recover from Covid-19 bruises saw Equity Bank Group dispense loans worth Sh650.6 billion in the first six months of this year.

This was a 29 per cent growth compared to Sh504.8 billion recorded same period last year, earning the lender an interest income of Sh55 billion up from Sh42.8 billion. 

Equity Bank Group CEO James Mwangi said the loan growth was targeted to support clients to recover and rebuild after the Covid-19 business disruptions.

“This also allowed re-purposing and retooling for resilience and agility to take advantage of emerging opportunities and green shoots in the real economy, “ Mwangi said.

He added that out of Sh171.4 billion Covid-19 restructured loan book, Sh46.6 billion has been fully repaid, and a further Sh114.0 has resumed repayment, with only Sh8.1 billion non-performing.

Out of the remaining Sh11 billion which is anticipated to resume repayment within the next six months, only Sh2.7 billion is showing the strain of recovery.

The growth in loan book also saw Equity Group’s net earnings for the first half of the year rise 36 per cent to Sh24.4 billion.

This was an Sh6.5 billion improvement compared to the Sh17.9 billion reported in the same period last year.

Targeted lending reflected by the 29 per cent growth of the loan book is part of the strategy to sustain recovery, growth and allow the real economy to thrive and brighten the lights of the economy by generating growth opportunities.

In pursuit of resilience and prudence, the group management has fully provided for the entire Sh8.1 billion Covid-19 book that has resumed repayment and is non-performing while proactively downgrading Sh2.7 billion of the remaining restructured book.

The success of the recovery and resilience strategy is reflected by the decline in NPL ratios to 8.5 per cent compared to 10.7 per cent the previous year.

The Group’s 8.5 per cent NPL positively and favorably compares to Kenya’s banking industry NPL ratio of 14.7 per cent as of June 30 

The Group’s NPL coverage stands at 94 per cent. NPL coverage inclusive of credit risk guarantees stands at 119.8 per cent and the cost of risk has normalised to pre-Covid rates of below 1.5 per cent.

Mwangi said the Group will continue to hedge against default through a loan book diversification strategy across market segments, with large enterprises holding 26 per cent, SMEs 43 per cent, consumers 20 per cent, agriculture 8 per cent, and micro enterprises three per cent of the loan book.

Group loan book diversification currently reflects 45.9 per cent in US dollars and 54.1 per cent in local currencies.

Geographical sovereign risk diversification has Kenya holding 65 per cent, DRC 19.6 per cent, Uganda 7.3 per cent, Rwanda 4.4 per cent, Tanzania 3.6per cent and South Sudan 0.1 per cent.

The high credit uptake saw the lender’s net earnings for the period under review rise 36 per cent to Sh24.4 billion.

This was a Sh6.5 billion improvement compared to the Sh17.9 billion reported in the same period last year.

The Group cost-income ratio improved to 46.7 per cent down from 48.5 per cent and the cost-to-asset ratio improved to 4.7 per cent down from 5.4 per cent.

The lender’s balance sheet expanded by 19 per cent to Sh1.3 trillion up from Sh1.1 trillion.

Group return on average equity grew to 28.9 per cent up from 25 per cent while return on average assets rose to 3.8 per cent up from 3.3per cent.

Transformation through digitisation has served us well and positioned us strategically for the future,” Mwangi said.