Equity Group’s net profit for the year ending December 2023 took a slight dip, falling by 6.48 % to Sh41.98 billion. This decline was attributed to the bank’s decision to double its provisioning for bad loans during the period.
Despite the decrease in net profit, Equity maintained its dividend for the year at Sh4 per share, amounting to a total payout of Sh15.1 billion.
The bank’s provisions surged to Sh35.25 billion from Sh15.4 billion in 2022, largely driven by a significant increase in its gross volume of bad loans, which soared to Sh114.6 billion by December 2023 from Sh63.13 billion the previous year.
James Mwangi, Equity’s CEO, explained that the decision to increase provisioning was made in the last quarter of 2023. He identified the real estate, manufacturing, transport, and logistics sectors as the main contributors to non-performing loans.
Additionally, there was a rise in non-performing loans from companies awaiting payment from the government, reflecting the broader impact of pending bills on the economy.
Mwangi also noted that the bank opted not to adjust the base interest charge on personal loans that were active as of January 2023, despite the Central Bank of Kenya progressively raising its base rate to 12.5 % by year-end.
These loans, comprising 32 % of Equity’s loan book, remained at a 13 % interest rate. Consequently, interest income grew at a slower pace compared to interest expenses.
Equity’s loan book saw a notable increase, rising by 26 % to Sh887.4 billion, while customer deposits grew by 29 % to Sh1.36 trillion.
However, the bank’s costs also saw a significant increase, rising by 57 % to Sh178.2 billion, primarily due to higher provisioning for bad loans.
