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By Omar Mohammed
NAIROBI, Nov 12 (Reuters) - Kenya’s Equity Group reported on Tuesday that its nine-month pretax profit rose to 24.78 billion shillings ($242.11 million) as it overcame the effects of an interest rate cap that slowed economic growth.
Net interest income over the period was 32.29 billion shillings, up from 29.5 billion a year ago, while non-funded income rose to 22.54 billion shillings from 19.8 billion, Chief Executive James Mwangi said at an investor briefing.
That contributed to an 11% jump in pretax profit.
Equity is the first bank to report its results after Kenya lifted a cap on lending rates which policymakers said had stifled credit, especially for small businesses, and hindered monetary policy.
About 800,000 Equity customers were locked out of borrowing from the bank after the cap was introduced in 2016, Mwangi said. Now, the bank has an opportunity to win them back, since they are still saving with the bank, he said.
The results were in line with expectations, said Patrick Mumu, an analyst at Genghis Capital.
“We should see the loan book grow robustly in the first year post-rate cap,” he said.
Equity’s Kenyan business contributes the bulk of its profits, but its subsidiaries in Tanzania, Rwanda, Burundi, South Sudan, Uganda and Democratic Republic of Congo grew their assets by 26% in the period.
They now account for more than a quarter of the bank’s total assets. Equity aims for its subsidiaries in east and central Africa to account for 40% of its assets. “We can see that happening in the course of next year,” Mwangi said.
As part of its growth strategy, the bank is pursuing mergers and acquisitions in the region. Equity said in September it was in talks with Banque Commerciale du Congo’s (BCDC) shareholders to buy a controlling stake for cash.
Equity already has a subsidiary in Democratic Republic of the Congo, which has a population of 80 million.
“A merger of existing Equity with that target would produce the largest bank in DRC in deposits,” he said.
Ethiopia is also a target, Mwangi said, as Africa’s second most populous nation prepares to liberalise its financial sector.
The Kenyan bank said its total assets rose to 677.1 billion shillings from 560.4 billion shillings in same period in 2018, while loans and advances to customers grew 21% to 348.9 billion shillings.
$1 = 102.3500 Kenyan shillings Reporting by Omar Mohammed; Editing by George Obulutsa, Maggie Fick and Jan Harvey