Equity Expands Mobile-Bank Unit That Wins 8 Out of 10 Loans

  • Stock slips to close at lowest level in more than two years
  • Lender’s loan-loss provisions almost tripled in first half

Equity Group Holdings Ltd., Kenya’s biggest lender by market value, will expand mobile-banking services outside its home market where the platform accounts for more than eight out of every 10 loans.

The bank, based in the capital, Nairobi, plans to offer Equitel in Uganda, Rwanda and Tanzania by the end of this year, Chief Executive Officer James Mwangi said in an interview Monday. It’s seeking partnerships with the local units of Bharti Airtel Ltd., MTN Group Ltd. and Millicom International Cellular SA, he said.

James Mwangi
James Mwangi
Photographer: Riccardo Gangale/Bloomberg

At least 82 percent of Equity’s new loans in the first half of 2016 were done through Equitel, with the number of transactions almost quadrupling to 97.8 million compared with a year earlier, he said. The bank earlier reported first-half profit that grew 18 percent to 10.1 billion shillings ($100 million.)

The bank will cautiously extend the services because “we don’t know whether the behavior of customers there will be like Kenyans,” he said. Introducing the service should help the lender be among the top five banks in all three countries by 2020, he said.

Kenyans have embraced the use of mobile-phones to pay for purchases, buy airtime, make transfers and apply for loans, with the market dominated by Vodafone Plc’s Safaricom, which processed transactions last year equivalent to 85 percent of Kenya’s total economic output. Equity is expanding its mobile-phone services regionally as profitability from some of the company’s units in Tanzania, Rwanda, South Sudan and the Democratic Republic of Congo declines.

The stock slipped 3.3 percent to 36.50 shillings by the close in Nairobi, the lowest since April 2014, and extending losses this year to 8.8 percent. The lender almost tripled loan-loss provisions in the first half to 1.93 billion shillings, while non-performing loans increased 29 percent to 10.8 billion shillings.

The “aggressive roll out of its banking channels on which the bank earns much lower revenue per transaction and is facing increasing competitive pressure from Safaricom’s M-Pesa” contributed to a drop in Equity’s core fee and commission income during the first half, Ronak Gadhia, an Africa equity analyst at Exotix Partners LLP in London, said in a note. Overall loan growth also moderated compared with the second half of 2015, he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE