Equity Bank Group has announced a 21.7 per cent rise in net profit to Sh5.9 billion for the three months ended March, surpassing the industry leader KCB #ticker:KCB.
The lender attributed its performance to lower provisions for bad debts, a drop in employees costs and increased earnings from loans.
Equity is the third lender after KCB to report its first quarter results that capture the impact of the more conservative accounting rules, dubbed IFRS 9, which came into force at the beginning of the year and were expected to raise provisions for bad debt through anticipation of defaults.
On Wednesday, Kenya's biggest bank by assets KCB reported a 14.1 per cent growth in first quarter net profit to Sh5.1 billion, riding on a 5.8 per cent loan book growth that raised interest income 11 per cent to Sh15.6 billion.
Stanbic Bank Kenya, the local banking unit of Stanbic Holdings, also announced a near-doubling of net profit to Sh1.9 billion in the same period on the back of higher non-interest income and lower loan loss provisions.
Equity Bank Group chief executive officer James Mwangi attributed Equity's rise in profit to a "diversification strategy" that eyed higher non-funded income, "prudent" lending which lowered bad loans on the back of the rate caps and lower staff costs aided by adoption of digital banking channels.
"We adopted a cautious approach in credit underwriting because of inability to price risk," said Mr Mwangi in yesterday's investors briefing.
"Digitization also helped us widen the profit margin," he added.
The top-tier lender's loan book expanded by 3.5 per cent, or Sh9.17 billion to Sh271.1 billion during the quarter.
Equity's total interest income rose by 10.5 per cent to Sh12.6 billion in the period with interest income from loans and advances rising 6.97 per cent to Sh8.76 billion.
During the quarter, Equity ramped up its purchase of government debt by 33 per cent to Sh150.1 billion which paid off as interest earnings from the government securities rose by 24.96 per cent or Sh73.9 million to Sh3.7 billion.
The lender's non-interest income went up by 6 per cent or Sh382.5 million to Sh6.71 billion in the period helping it boost margins.
The lender's loan loss provisions more than halved, by 55 per cent or Sh438.3 million, to Sh358.5 million in the quarter with its non-performing loan portfolio dropping by Sh1.4 billion to Sh18.1 billion in the period.
Its interest expenses went up 10.54 per cent to Sh2.85 billion.