Equity Kenya Earnings Flat as South Sudan Devaluation Weighs

Equity Group Holdings Ltd., the owner of Kenya’s biggest lender by market value, posted flat earnings that disappointed investors who had expected growth of more than 10 percent, as weaker currencies weighed on its regional operations.

Net income grew 0.6 percent to 17.3 billion shillings ($170.4 million) in the 12 months through December from 17.2 billion shillings a year earlier, Chief Executive Officer James Mwangi told an investor briefing Tuesday in the capital, Nairobi. In 2014, the company booked a one-time gain of 1.06 billion shillings from the sale of its stake in HF Group Ltd.

James Mwangi
James Mwangi
Photographer: Ramin Talie/Bloomberg

Revaluation losses at Equity, which operates in six African nations, slumped to 7.84 billion shillings from 977.3 million last year, which Mwangi attributed to the 84 percent devaluation of the South Sudanese pound in December as well as weakness in the foreign-exchange rates of neighboring Uganda and Tanzania last year.

The weaker currencies “led to us to have a negative revaluation reserve,” he said.

The bank also set aside 2.43 billion shillings for loan losses, from 1.59 billion shillings a year earlier. Kenyan lenders have been increasing their loan-loss provisions after the central bank raised credit costs. Last year, it increased Kenya’s main lending rate by 300 basis points to 11.5 percent to curb accelerating inflation and a weakening currency. Commercial bank lending rates stood at 18.3 percent in December from 16.1 percent in June.

Equity’s stock fell the most in three months, dropping 4.1 percent to 40.75 by the close in Nairobi. That pared the share’s gain to 1.9 percent so far this year.

“Its share price fell today because results came below market expectations of double-digit growth,” said Maurice Oduor, an investment manager at Cytonn Investments Management Ltd. in Nairobi.

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