EQUITY Bank yesterday announced a Sh11.8 billion profit before tax for the period ended September 30 up from Sh9 billion the previous year despite the prevailing high interest rates.

The lender's net profits rose by 14 per cent to Sh8.3 billion compared to Sh7.3 billion in 2011 driven by increased borrowing, the high interest rates notwithstanding.

Net loans and advances rose 20 per cent from Sh109.4 billion to Sh131.3 billion helped by the bank's decision to put a maximum interest rate of 25 per cent at a time when rates went up to 30 per cent. This saw interest income rising by 81 per cent to hit Sh20.3 billion, up from Sh11.2 billion in 2011.

However interest expenses rose 123 per cent to Sh5.4 billion from Sh2.4 billion as depositors demanded for higher savings rates. Managing director James Mwangi said the economic conditions are improving and the bank is expecting an even better performance in the remainder of the year.

The country's inflation rate has fallen from 7.7 per cent in July to 4.4 per cent in October renewing hopes that interest rates will fall. The Central Bank Rate is now at 13 per cent having been slashed from 16.5 per cent while the exchange rate has remained stable at Sh85 as last month.

"The growth prospects for the bank are very strong," Mwangi told an investor. The bank now has an asset base of Sh232.2 billion behind Kenya Commercial Bank's Sh371.6 billion. KCB is still the most profitable bank in the country with profits before tax for period rising 43 per cent to hit Sh13 billion, up from Sh9.1 billion.

Equity said it is targeting more revenues from an increasing agency network, recent entry into Tanzania and Rwanda as well as from its operations in South Sudan and Uganda. The target is to increase the number of agents from 6, 000 to 10, 000 before the end of the year, Mwangi said.