Equity Bank Group has increased dividends to shareholders by 33 percent to Kes15.3 billion after profits soared 15 percent to Kes46.1 billion in the year ending December 2022.
Equity Group CEO Dr James Mwangi said the higher payout will be crucial for shareholders under the current tough economic environment even as the lender prepared for the economic downturn with buffers against defaults.
Kenya’s largest lender which has grown to acquire 18 million customers and Kes1.4 trillion assets saw an impressive increase in non-funded income which grew by 33 percent to Kes58.3 billion.
Strong growth in interest income from lending to traders and the government also brought Kes119.6 billion, a 27 percent jump.
The revenues were, however, whittled down by higher costs especially providing for bad loans that closed at Kes63.1 billion at the end of last year.
Equity Bank 180 percent increase in loan loss provision from Kes4.9 billion to Kes13.7 billion shows banks are anticipating a tough economy this year that will result in company struggling to service their debts.
The lender, which projected bad loans would range between 5 and 7 percent last year, saw non-performing loans of 7.7 percent an almost accurate prediction.
This year, Equity bank Group expects NPL ratios of between 7 to 10 percent that has necessitated the huge forward-looking insurance against defaults.
Dr Mwangi said household borrowers were good at paying an indication that the bad loans will be largely driven by corporates. At the moment, Equity SME loan book carries the highest rates of default for the bank.
However, Dr Mwangi said the huge provisions and a backing of loan guarantees from development partners mean that the bank has a loan loss coverage of 123 percent which mean the bank will be able to whether the tough economic environment.
The Equity Bank boss said sustained growth even during the rate cap and the Covid-19 pandemic that has seen the bank grow to Kes1.4 trillion in assets is a track record that indicates the bank will still grow even under the current macro-economic challenges.
The Kenyan economy has been hit by local political turmoil, inflation and higher interests rates at the same time as global shocks on spike in major imports due to decline of the shillings has left businesses exposed.