Equity bank has advanced loans worth Ksh 478 billion to its customers during the 2020 financial year compared to Ksh 366 billion the previous year, which represent a 30 percent growth in customer loans.
Despite massive disruption of economic activities brought about by Covid-19 pandemic, the bank accommodated Kshs 171 billion of loans for customers whose repayment capacity was adversely impacted by the pandemic.
This represents 32 percent of the entire gross loan book of Kshs 530 billion. As at 31st December Kshs 40 billion of the restructured loans had resumed repayments and normalized.
During the year, the bank also saw its total operating costs grow by 67 percent to Kshs 71 billion up from Kshs 42.5 billion driven by a 496 percent growth in gross loan provision of Kshs 26.6 billion up from Kshs 5.3 billion in the prior year.
The bank said this increased the cost of risk to 6.1 percent up from 1.3 percent the previous year. The higher loan loss provisions enhanced NPL coverage to 89 percent.
Announcing the 2020 financial year results, Equity Group managing director and CEO Dr. James Mwangi said a deep review of the entire Ksh 171 billion accommodated loans revealed doubts on the future viability and quality on Ksh 9 billion of loans.
Dr Mwangi said this prompted the downgrade of the said doubtful loans to Non-Performing Loan ( NPL IFRS 9 stage) thus increasing the NPL portfolio to 11 percent up from 10.4 percent as at 30th September 2020 and 9 percent at the end of the previous year.
The bank closed the year with 23 percent accommodated loan book which is equivalent to 11 percent of the balance sheet. While it’s net interest income grew by 23 percent to Kshs 55 billion up from Kshs 45 billion driven by a 30 percent growth on customer loan book and 26 percent growth in investment in Government securities.
The bank also saw yields on loans decline from 12.6 percent to 12.4 percent 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.
The bank’s profit after tax contribution from business outside Kenya grew to 28 percent from 18 percent.
“The 2020 results reflect a purpose lived and a management team uniquely differentiated by the decisions it made. From the onset, Equity Group management opted to safeguard and cushion the lives of staff, clients, and host communities by supporting lives and livelihoods through maintaining economic activities to keep the lights of the economies on and boosting Government efforts with Kshs 4 billion initiatives,” said Dr Mwangi.
Dr Mwangi said that some of the interventions the bank initiated to cushion its customers include offering opportunities for loan accommodation up to 45% of the loan book, to minimize disruption and allow re-adjustment to match new cash flows while waiving rescheduling fees of Kshs 1.2 billion.