Equity Group Pauses Africa Expansion Plans as Economies Slow – Bloomberg

6 months ago Comments Off on Equity Group Pauses Africa Expansion Plans as Economies Slow – Bloomberg

Equity Group Holdings Ltd., Kenya’s biggest bank by market value, put plans to expand into five other African countries on hold after sliding prices for commodities from oil to copper caused currencies to tumble.

The lender, which had prioritized entries into Nigeria, Angola, Ghana, Mozambique and Zambia, will instead focus on deepening its presence in markets in which it already operates by growing branch networks, Chief Executive Officer James Mwangi said.

“We do still have an ambition to be in 15 countries within the next 10 years,” he said in an interview in the capital, Nairobi, on Tuesday. But with economic growth slowing around the continent, “this is not the moment to think about expansion. You’d almost be insane to think of setting up in those countries.”

The International Monetary Fund last month cut its 2016 growth forecast for sub-Saharan Africa by 1 percentage point to 3 percent as slumping commodity prices knock government revenue. Countries from Mozambique to Ghana have approached the Washington-based lender for assistance to plug budget deficits and cope with currencies that have weakened as much as 35 percent over the past 12 months.

Ethiopia Entrance

Equity Group, which has units in six African countries, is still ready to enter Ethiopia as soon as it is granted a license, while it will start mobile-phone banking services in Rwanda, Tanzania, Uganda and Democratic Republic of Congo this year, Mwangi said. The lender has opened 19 additional branches in the Congo, where it expects to more than double the number of new accounts this year, helping to boost growth in loans by more than 60 percent, compared with 49 percent in 2015.

Plans to suspend its expansion come as the company reports a 20 percent increase in first-quarter profit to 5.1 billion shillings ($51 million). Net interest income rose 37 percent to 10.4 billion shillings in the three months through March, the CEO told reporters in Nairobi.

“We expect to improve on the performance of first quarter and add 1.5 million new customers in Kenya,” Mwangi said, driven by loans issued via its mobile-banking platform, Equitel, where it also sees user numbers growing to 3.5 million by the end of this year.


“Here we see significant cross-selling, we’re now doing brokerage on it so that people can buy shares and insurance on it,” Mwangi said.

South Sudan, one of the six nations the lender operates in, weighed on the company’s performance because of a currency devaluation late last year. The unit contributed 0.2 percent to the group compared with 4.7 percent the previous period, while net interest margins in the first quarter this year fell to negative 0.1 percent. 

“Loan growth is unlikely to accelerate significantly through the rest of the year due to potential regulatory disruptions” caused by the collapse of Chase Bank Kenya Ltd. last month, Ronak Gadhia, an analyst at Exotix Partners LLP, said in an e-mailed note. There may also be “increased risk aversion as the presidential elections approach,” he said.

Equity Group is not interested in making any acquisitions in Kenya, where consolidation is expected due to the tighter regulatory environment, Mwangi said, adding that 43 banks are too much for an economy of Kenya’s size.

KCB Group Ltd., Kenya’s biggest bank by assets, agreed to consider buying a majority stake in Chase Bank, which was taken over by regulators on April 7, a day after its chairman and group managing director resigned as the company issued restated results that received a qualified opinion from auditors.

Equity Group Pauses Africa Expansion Plans as Economies Slow – Bloomberg