On Tuesday, Equity Bank reported a more than doubling of loans disbursed through its mobile money platform, Equitel, to Sh14.1 billion and a 20 per cent increase in its first quarter profits to Sh5.1 billion.
“We have issued two million Equitel sim cards of which 90 per cent are activated,” the bank’s chief executive, James Mwangi, said.
The bank said 81 per cent of its loans are now being disbursed through the mobile platform, allowing it to cut on stationary and staff costs.
Equity’s loan book grew to Sh275 billion in the first quarter compared to Sh224 billion in March last year while customer savings rose to Sh299 billion from Sh276 billion a year earlier.
The steep increase in the volume of loans disbursed through the phone also benefited from the fact that the average size of loan disbursed through Equitel grew to Sh42,000 from Sh7,000 in December.
Mr Mwangi, however, disclosed that Equity cut back on take up of fixed deposits after it tapped into cheap funding from the international market during the Global Entrepreneurship Summit last year.
The bank received Sh20 billion at an average four per cent per annum compared to average fixed deposit rate of 7.5 per cent.
Equity held Sh62 billion in government securities as at end of March up from Sh42.7 billion in December and Mr Mwangi said the bank invested an additional Sh20 billion in April.
Cheaper funding saw the bank’s net interest income grow 37 per cent to Sh10.4 billion while interest from government security rose to Sh1.2 billion, reflecting the change in strategy that has seen the bank increase its lending to the Treasury.
Mr Mwangi argued that the lending to government did not mean lack of opportunity in the private sector, but a conservative approach that is meant to avoid defaults while utilising idle cash in its books.
Equity’s cash holdings dropped to Sh48.3 billion from Sh62 billion last year, a development Mr Mwangi attributed to growth of agency banking that enables agents to use own balances to serve the bank’s customers.
Increased lending to government, however, hit the bank’s balance sheet as it was forced to book revaluation losses of Sh8.4 billion associated with change in prices of Treasury bills and bonds available for sale to the bank.
The results also show that Equity relied on improved performance of its Kenyan operation to wipe off a 45 per cent drop in earnings from its regional subsidiaries.