The lender, which also operates in Uganda, Tanzania, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo, more than doubled its pre-tax profit last year as revenues rose and bad debts decreased.
“There is a huge opportunity for (asset) reallocation,” Group CEO James Mwangi said in an investor briefing.
Equity had placed 394 billion shillings ($3.45 billion) in government securities at the end of last year, double the amount of the previous year, and it will transfer some of it to loans to the higher yielding clientele, he said.
Kenya’s central bank has approved Equity’s interest rate pricing plan, Mwangi said, making a shift to increased customer lending possible.
The East African nation removed the cap on lending rates at the end of 2019 and the central bank is committing all lenders to approve their individual pricing mechanisms.
Equity, which is the only lender whose plan has been approved so far, will charge customers interest rates of 13-18.5%.
“We can now accommodate all borrowers,” Mwangi said, referring to those who had been forced out of credit due to the rate cap.
The group’s total costs fell last year, partly due to customers shifting to digital channels, Mwangi said, predicting spending would fall further this year.
The group reported a jump in interest income over the period, as well as transaction income.
It cut its provisions for bad debts to 5.84 billion shillings from 26.63 billion shillings the previous year, boosting pre-tax profit by 134% to 51.9 billion shillings.
Equity recommended a payout of 3.00 shillings per share, resuming a dividend payment for the first time since 2018. It did not pay a dividend for 2019 and 2020 to build capital.
($1 = 114.3000 Kenyan shillings)
(Reporting by Duncan Miriri and George ObulutsaEditing by Mark Potter)
By Duncan Miriri and George Obulutsa