EQUITY Bank yesterday announced a Sh17.4 billion profit before tax for the year ending December 31 ahead of Kenya Commercial Bank which reported a pre-tax profit of Sh17.2 billion.
Last year Equity trailed KCB with profit before tax at Sh12.8 billion compared to KCB's Sh15.1 billion. Barclays which reported a pre-tax profit of Sh13 billion, this financial year is in the third position.
KCB is however still the biggest bank in the country and region in terms of asset base which stands at Sh367 billion compared to Equity's Sh243 billion.
Equity attributed its good show to positive growth in its subsidiaries, diaspora banking, its small and medium sized strategy and and increased lending.
The bank's income grew by 28 per cent hit Sh36.8 billion up from Sh28.67 billion while total operating expenses grew by 22 per cent to Sh19.58 billion up from Sh15.98 billion.
Equity chief executive James Mwangi said the subsidiaries in Uganda, South Sudan, Rwanda and Tanzania now contribute 15 per cent of revenues , up from 5 per cent in 2007.
The growth in income was driven by a 19 per cent growth in loans from Sh114 billion to Sh136 billion as well as a 35 per cent growth in investment in government securities resulting in growth of 48 per cent in net interest income from 16 billion to Sh24 billion.
KCB while releasing its results said it subsidiaries are all doing well and contributing positively to the results. The group's loan book grew to Sh211 billion, up from Sh198 billion seeing interest income on loans growing by more than Sh10 billion to stand at Sh33.9 billion, up from Sh23.6 billion the other year. Interest from government securities more than doubled to Sh7.6 billion, up from Sh3.7 billion.
But the two banks were hard hit by a high interest rate environment in the year with interest expenses growing astronomically. For instance, KCB's interest expense on customer deposits more than trippled to Sh11.2 billion, up from Sh3.8 billion the other year.
Equity's interest expenses on deposits rose to Sh5.1 billion, up from Sh2.1 billion. KCB's customer deposits rose to Sh288 billion, up from Sh259 billion while Equity's mobilised Sh 167.9 billion in deposits, up from 144.2 billion in 2011.
The two banks said agency banking has helped in mobilisation of deposits and boosting the transaction income.