Equity Bank Beats COVID-19 Stress To Register 51% Balance Sheet Growth

Financial services provider Equity Group Holdings, which operates the Equity Bank brand in the great lakes region, has weathered the COVID-19 disruption to register a 51% growth in its balance sheet with total assets growing to Kshs1.015 billion up from Kshs674 billion the previous year.

The growth delivered through both organic and merger & acquisition strategies saw the group become the first financial institution to cross the trillion shillings rubicon in East and Central Africa.

The growth has been driven by a 53% increase in customer deposits which grew to Kshs741 billion up from Kshs483 billion, while long-term debt financing grew by 71% to Kshs97 billion from Kshs57 billion with shareholders’ funds growing by 24% to Kshs139 billion up from Kshs112 billion.

Deployment of the 51% growth of funding enabled loans to customers grow by 30% to Kshs478 billion up from Kshs366 billion. Cash and cash equivalents grew by 186% to Kshs247 billion up from Kshs86 billion. Investment in Government securities grew by 26% to Kshs217 billion up from Kshs172 billion.

Net interest income grew by 23% to Kshs55 billion up from Kshs45 billion driven by a 30% growth on customer loan book and 26% growth in investment in Government securities.

Non-funded income grew at 27% to reach Kshs38 billion up from Kshs30 billion to contribute 41% of the total income. Forex trading income grew by 77% to stand at Kshs6.2 billion up from Kshs3.5 billion.

Diaspora remittances commissions grew by 76% to Kshs1.5 billion up from Kshs0.9 billion. Volume of Forex trading increased by 51% to Kshs863 billion up from Kshs571 billion with Diaspora remittance contributing 32% of the volume of forex traded.

Total operating costs grew by 67% to Kshs71 billion up from Kshs42.5 billion driven by a 496% growth in gross loan provision of Kshs26.6 billion up from Kshs5.3 billion in the prior year, increasing the cost of risk to 6.1% up from 1.3% the previous year. The higher loan loss provisions enhanced NPL coverage to 89%.

As part of the Group’s commitment to support lives and livelihoods, keep the lights of the economies on by avoiding massive disruption of economic activities, the Group accommodated Kshs171 billion of loans for customers whose repayment capacity was adversely impacted by Covid-19. This represents 32% of the entire gross loan book of Kshs530 billion.

As at 31st December Kshs40 billion of the restructured loans had resumed repayments and normalized. A deep dive review of the entire Kshs171 billion accommodated loans revealed doubts on the future viability and quality on Kshs9 billion of loans promoting the downgrade of the said doubtful loans to NPL (IFRS 9 Stage 3) increasing the NPL portfolio to 11% up from 10.4% as at 30th September 2020, and 9% as at the end of the previous year and closing the year with 23% accommodated loan book equivalent to 11% of the balance sheet.

The Group’s cost income ratio improved to 48.5% from 51.1% the previous year driven by improvement in cost of funds from 2.9% to 2.8% and enhancement of yields on government securities from 10.1% to 10.7% despite realization of capital gains on the securities trading of Kshs3 billion up from Kshs1.1billion the previous year and 117% growth of mark to market gains to Kshs7.4 billion up from Kshs3.4billion.

Yields on loans declined from 12.6% to 12.4% due to increased suspended interest on increased NPL book and change of loan book mix of local currency to US$ currency to 57%:43% from 64%:36% ratio in favour of the local currency as a result of acquisition and merger of BCDC in DRC and increase of 186% on cash and cash equivalent. The profit after tax contribution from the business outside Kenya grew to 28% from 18%.

The Managing Director and CEO Dr. James Mwangi said: “The previous global pandemic was the Spanish Flu which occurred in 1919, a century back, and hence the world had lost its memory and had to re-learn, adapt and adjust making 2020 an exceedingly difficult and challenging year.

Our corporate purpose of ’Transforming lives, giving dignity and expanding opportunities for wealth creation’ became the guiding compass of the organization’s essence on how to navigate through the crisis and the challenging environment. Our results and performance became a human story of resilience and determination to live an ethical human purpose.”

Kampala Parents Kicks Off Online Teaching Amidst Covid-19 Pandemic

Kampala Parents School recently announced it will start delivering lessons online using the Zoom Application and true to its word, the Ruparelia Group-owned school Tuesday commenced the exercise.

The first beneficiaries of the exercise were the P5, P6 and P7 classes. Classes for Primary Three and Four will start on 29th May 2020; Top Class, Primary One and Two will start on 4th June 2020.

In an interview with CEO East Africa, Kampala Parents School proprietor Dr. Sudhir Ruparelia said that the school had procured 40 internet-connected computers. He said teachers had been trained to use the computers.

“Kampala Parents has always been a proud leader in innovating for our parents and learners. It is difficult to predict when Covid-19 restrictions will end, yet our children must continue being fed with knowledge,” he said.

Dr. Ruparelia said that parents will not incur any extra fees beyond the normal tuition structure. “Learners who had completed their term 1 fees will continue and finish the syllabus at no cost,”

“We also urge those who had not completed doing so, so that the learners may catch up,” he said adding that, beginning on the June 09th the school would open for online Term 2 online lessons, subject to the guidance by the Ministry of Education for learners in Primary Seven.

Because of the COVID19 pandemic, President Yoweri Museveni in March closed all school and learning institutions and have remained shut with no sure date of their reopening. This has meant that students and pupils are not learning. 

 

Prudential Supplements Govt COVID -19 Food Relief Efforts With Shs300m Donation

The ongoing lockdown measures designed to curb the spread of Covid-19 have adversely affected vulnerable communities’ members who survive by accessing urban centres every day for their livelihood, Arjun Mallik, MD, Prudential East Africa, Monday told journalists in Kampala.

He said that while the lockdown measures are being implemented with positive intent, disruption of community member’s routines means some people are going hungry in their home.

And in order to supplement government efforts to provide food relief, and support those most in need, Mallik and Prudential, an insurance firm, announced a donation of Shs300 million towards food relief in the country.

Prudential said the donation will feed the most vulnerable and poor who have been greatly affected by the lockdown, many of whom live on less than a dollar a day and therefore do not have any savings to help them go through this period.

This will be distributed via two organisations: Humanitarian Operations Projects and Emergencies (HOPE) and Heal the Planet Global Organisation (HTP).

Alhaji Kaddunabi Lubega, the CEO, Insurance Regulatory Authority said the outbreak of Covid-19 ‘has highlighted to all of us,’ the need to always be prepared for the unexpected challenges of life.   “I convey my gratitude to Prudential Uganda for standing by Ugandans in this hour of need,” he said.

While receiving the fund on behalf of HOPE, Emmanuel Kashaija, Country Director, appreciated Prudential for supporting the vulnerable slum dwellers in the western region who have been profiled as elderly people, orphan households, pregnant women, street children and the disabled, adding that the food relief will go along way in improving their social and psychological well-being.

Benjamin Kivumbi Earnest, President, HTP, thanked Prudential for the timely response towards helping the slum dwellers around Kampala in the areas of Nsambya, Katwe, Bwaise and Makerere Kivulu, Makindye, Masajja. “These people are in dire need of food and we will work with the local council to make sure food is delivered at their door step,” he said. 

Centre For Budget & Tax Policy Has Suggested These Fiscal Measures To Help Govt During COVID-19

Centre for Budget and Tax Policy (CBTP) has suggested to President Yoweri Museveni ‘bold and drastic fiscal measures’ that when implemented will stabilize the current disruptions that have been caused by coronavirus disease (COVID-19).

These measures by Centre for Budget and Tax Policy will according to a letter from the NGO’s executive director Patrick Katabazi to President Museveni and copied to the Prime Minister and minister of finance will go a long way in setting a firm foundation for future economic recovery. 

“It is therefore paramount that the measures being undertaken currently to avert the spread of the infection are matched with social protection measures to cushion the population through this period by smoothening consumption patterns among the poor and vulnerable,” Katabazi wrote to the president.

And with the biggest working population in the country not being able to go to work because of the directives by the president, Katabazi notes that curtailing this labour supply has dire consequences on households. He said that the drastic fiscal measures they are proposing will support both poor and non-poor during this period.

“These unprecedented measures are necessary to stabilize the current disruptions that have been occasioned by the impact of the COVID-19. They may seem radical but we implore the government to look at them critically and either adopt them or improve them,” he added.

To begin with, Centre for Budget and Tax Policy wants the government to improve the Senior Citizens Grants programme to cover older people from the age 60 years something that will increase the number of beneficiaries from 200, 000 to 1.2m people in rural areas to 300, 000 urban centres. Also, the monthly money paid should increase from Shs25, 000 to Shs50, 000.

By targeting this population, which is 2m, the government will be directly supporting about 10m Ugandans indirectly given that an average household in Uganda has about 5 people, the NGO said, adding that this intervention requires additional funding of Shs257.54bn for at least 4 months. The programme currently costs a total of Shs142.46bn

The NGO wants public servants earning less than Shs500, 000 like teachers, nurses, police officers among others to be given a top-up of at least Shs100, 000. This will cover about 150, 000 people at a cost of Shs45bn. A similar approach according to the NGO should be extended to the formal private sector where workers getting less than 1m are also topped up with Shs100, 000 because they pay PAYE.

Also, it is suggested that people in the informal sector like boda boda riders supported with an income stimulus to avert income disruptions they are facing. And for that needs to liaise with landlords to reduce the pressure on tenants during this period.  

And in recognition of people directly battling the virus in the country like medical workers, security guards and journalists, the think tank says special consideration should be made in form of allowances and insurance cover to the dedicated professionals on the COVID-19 frontline.

Centre for Budget and Tax Policy recommends that government pays its domestic arrears to businesses it owes money and for it to renegotiate with creditors in an effort to restructure the country's public debt portfolio with a view of rescheduling repayment timelines.

The advocacy group is also in support of government releasing payment for pensioners in a timely manner as well a designing a plan for clearing area.

 "The senior citizens are not only vulnerable economically but also highly susceptible to having adverse effects when infected by the virus," it said.

The NGO is of the view that government suspends non-critical projects during this period and also shut down non-essential government business like workshops, traveling abroad, field trips and consumables to save.

Cautious Sudhir Closes Down Hotels As COVID19 Bites Tourism Sector

Businessman Dr. Sudhir Ruparelia, the chairman of Ruparelia Group which owns Speke Group of Hotels, has told CEO East Africa Magazine that they will be closing down Speke Resort and Conference Centre and Munyonyo Commonwealth Resort due to the effects coronavirus disease (COVID19) has had on the economy, particularly the tourism sector.

The closure of the two five-star hotels in Munyonyo takes effect on Friday 27th March 2020 to until when COVID19 has been thoroughly dealt with.  The businessman said other hotels like Forest Cottages in Naguru and Dolphin Suites in Bugolobi will subsequently follow. Kabira Country Club will partly be closed. 

"It is really bad. We have decided to close Speke Resort and the Commonwealth Resort. We will reopen once corona issue I sorted out. For the others like Kabira Country Club, only a small section will remain open," Sudhir told the CEO in a phone interview.

Under the Speke Group of Hotels, Ruparelia Group boasts of the largest and wealthiest chain of hotels, restaurants and apartments in the country. The group also owns Speke Hotel, Rock Bar & Grill, Speke Apartments Wampewo, Speke Apartments Kitante, La Cabana Restaurant, among others.

The Group recently launched the construction of a five-star Speke Resort and Convention Center in Entebbe.

Lost Jobs

The businessman also revealed that about 3000 workers will at this moment lose their employment. Already, 1000 of the 3000 have been relieved of their duties and another 2000 will follow. Group employees 8000 workers in its hotels' chain.

Already, Ruparelia Group has felt the pangs of COVID19 after they were forced to close Kampala Parents School, Kampala International School Uganda and Victoria University following a presidential directive for the country to close all schools.

Many teachers, administrators, services providers were put out of employment until the situation normalizes.

Impact of COVID19

Uganda, as of 26th March 2020, had confirmed 14 cases with no death but a global death toll of more than 10, 000 people had been recorded. Many countries had issued travel bans to their citizens dealing a big blow to the global economy.

In Uganda, President Yoweri Museveni issued a directive that no passenger flight should be allowed in the country or to leave. He also issued a ban on public transport as the country slowly shuts down in an effort to combat COVID19.

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