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.”

Equity Bank Sells Simbamanyo House To Meera Investments

Meera Investments Limited, a company owned by businessman Sudhir Ruparelia, has emerged as the best bidder and now becomes the owner of Simbamanyo House, the building that accommodates Ministry of Gender, Labour and Social Development.

The building, located at Plot 2 Lumumba Avenue, was auctioned by Equity Bank Uganda in an effort to recoup an unpaid loan amounting to about $8.1m from Simbamanyo Estates.

In a letter to tenants, Equity Bank announced the takeover and asked them to corporate with Meera Investment, the new landlord.

“We are writing to inform you that Equity Bank Uganda Limited, as mortgage, has completed the sale of the above-mentioned property, after a public auction concluded on October 8, 2020, to the best evaluated bidder M/s Meera Investments Limited.

“The new owners will be getting in touch with all tenants individually to work out the modalities for their ownership transition. We trust you will accord the new owners all courtesy and all future rental payments and other tenant inquiries and obligation will be handled by Meer Investments Ltd or their agents," Equity Bank said in a notice.

Sam Kirubi, the managing director of Equity Bank, who signed of the notice, said that all the tenants were put on notice about the auctioning of the property in an advert placed in Daily Monitor newspaper on September 8.

Meera Investments Limited was also immediately after the sale registered on the title of Plot 2 Lumumba Avenue. Johnson Bigiira, the senior registrar of titles in Ministry of Lands said Meera Investments Limited was registered on the title under Instrument Number KCCA 00074649.

Sudhir said that Meera Investment participated in the competitive bidding and his $5m was displayed as the best evaluated bid.

“Meera Investments Limited were the highest bidder for the auction from Equity Bank and acquired the property by the pay of $5m. We are ready to meet our new tenants and promise to cooperate with them,” Sudhir said.

Simbamanyo Estates is embroiled in a property dispute with Equity Bank Uganda and Equity Bank Kenya resulting from unpaid loans.

Documents in the Commercial Division of the High Court show that on August 20, 2012, Equity Bank entered into a financial transaction agreement that would lead the financial institution to release $6m to Simbamanyo Estates.

The two banks, details indicate, pooled money together to advance the facility with at least $3.5m drawn from Equity Bank Kenya and $2.5m from Equity Bank Uganda.

Simbamanyo Estates which acquired the loan to finance the construction of Afrique Suites Hotel in Mutungo failed to meet its loan obligation leading to the situation at hand.

The total outstanding including interest and operational fees, among others, court documents show, would come to at least $8.10m.

Fred Muwema, the lawyer representing Simbamnayo Estate in this matter, said the matter is still in court and that there is caveat already on the property forbidding transfer until the case is heard and resolved.

“The battle is not over and as we speak, we are in possession of the property, I don’t understand why the bank is in the hurry. This has happened before and we took it away from them. The bank should wait until the final decision on this matter is made.” Muwema said.

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