Ratings Agency Moody’s has picked Equity Bank as among the few financial institutions that have strong liquidity buffers and adequate liquidity assets which will aid in easing asset quality pressure on the lender amid the pandemic.
Equity Group’s Q1, 2020 financials saw its net earnings drop by 14% to KSh 5.43 Billion driven by an increase in the lender’s provisions for loan losses which shot up sevenfold from KSh 409.9 Million in Q1, 2019 to KSh 3.1 Billion in Q1, 2020.
The bank’s gross earnings in the first quarter of 2020 also fell to KSh 7 Billion from KSh 8.8 Billion over a similar period in 2019. This slide-in performance of Equity Group provides a bird’s eye view of the financial strain lenders are undergoing as customers experience difficulties in meeting the loan repayment obligations.
The unaudited financial statements for the period ended 31st March, 2020 shows that the size of Gross Non-performing loans grew from KSh 29.3 Billion in the first quarter of 2019 to KSh 44.6 Billion in the first three months of 2020.
Fees and Commissions on loans to customers grew marginally from KSh 9.1 Billion to KSh 10.8 Billion. The Group’s balance sheet size increased from KSh 605.7 Billion to KSh 693.2 Billion in Q1, 2020.
Total shareholder wealth grew from KSh 510.2 Billion to KSh 576.8 Billion during the period under review.
Data from Equity Group shows that it now executes 97% of all transactions outside its physical branches. The largest bulk of these transactions( 79%) are done on mobile and internet banking platforms followed by agency banking (11%), Branch (3%), ATMs (3%) and others (4%).
In terms of value, branches lead with 47% of the transactions followed by mobile and internet banking (27%), Agency (17%), ATMs (5%) and others(4%). 53% of the Group’s value is still moved outside the brick and mortar branches.
A huge chunk of transactions by customers shifted to non-branch alternatives such as Mobile and Internet banking, Agency Banking and Automated Teller Machines.
The Group, which has subsidiaries in 5 Eastern Africa countries, is exposed to various IT platforms including Eazzy FX, Equity’s new online forex trading platform that began trading in April 2019.
Equity Group has already informed its shareholders of its decision to withhold payment of dividends. It says this is to enable it to build enough capital and liquidity to deal with the unforeseen challenges posed by the COVID-19 pandemic.
Covid Digital Ready Bank
COVID-19 has made it clear how important it is for financial service providers to strengthen their offering through digital platforms given the change in customer behaviours and expectations.
A recent report by PwC looks at the impact of the virus on retail banking environment and notes that when covid19 pandemic hit, everything changed overnight and less than 15% of the world’s banking institutions were digitally prepared.
Thanks to a massive investment in technology even before the pandemic, 97 per cent of all Equity Group’s transactions are now outside the branch.
With many people now doing things online and avoiding cash for both sanitary reasons as well as convenience, the bank has proven through its state-of-the-art technology that your smartphone has essentially become a bank in your hands.
In these times of uncertainty, it is essential that banking customers feel their money is accessible and taken care of. Some may feel the need to change banking relationships if there are not offerings that coincide with current restrictions.
