Kenya's Leading Bank, Equity Group, to Expand Loans as Government Signals Lower Rates

Equity Group Holdings Plc, Kenya’s largest bank by market value, is set to increase lending by up to 5% in its domestic market during the second half of the year, following the government's indication of lower interest rates.

Last week, Kenya’s central bank made an unexpected move by reducing its benchmark interest rate for the first time since early 2020, offering relief to consumers burdened by the rising cost of living. The monetary policy committee lowered the key rate to 12.75% from 13%.

Chief Finance Officer Moses Nyabanda stated on Monday, after the bank released its earnings report, “Our plan — now that we’ve seen the signaling effect from the central bank — is to increase our inter mediation. In the first half, our lending had decreased by 3%. We’ve given guidance that we expect our loan book to grow between 2% and 5% in the second half.”

Nyabanda added that the bank intends to reduce commercial interest rates, although specific figures were not disclosed. If other banks follow suit, this could likely stimulate economic activity.

Equity Group, headquartered in Nairobi with operations across six East African markets including Rwanda, Uganda, and the Democratic Republic of Congo, reported that its units outside Kenya now contribute 47% of total loans and 51% of net income.

In the first half of the year, lending by the Kenyan unit declined by 7%, as high-yield government securities, offering returns of up to 17%, drew investments away from the private sector.

The bank's non-performing loans ratio rose to 12.9% from 9.8% a year earlier. Special Assets Director Christine Browne indicated that the bank aims to reduce this ratio to below 10% by the end of the year through various strategies.

Equity's shares have surged more than 18% this year, making them one of the top performers in the 63-member All-Share index, which has gained 11% over the same period.