NAIROBI, Aug 22 (Reuters) - Equity Group Holdings, one of Kenya’s top lenders by assets, reported a drop in first-half pretax profit, blaming a fall in interest income after the government capped rates.
Lenders in the East African nation have seen their profits fall since the government capped commercial lending rates last September, arguing banks were not passing on the benefits of growth in the industry to their customers.
Equity said on Tuesday that its pretax profit fell 6.6 percent to 13.29 billion shillings ($129 million) in January-June as the impact of the rate cap was compounded by a drought, high inflation and uncertainty over the presidential election held earlier this month.
The lender responded to the cap by increasing its investments in government securities, which accounted for almost a quarter of its assets during the first half, it said in a statement.
It also increased income from its non-lending business, such as mobile banking commissions and trade finance. Income from that segment rose 20 percent from the same period last year, to 13 billion shillings.
“The Group continued to evolve its business model to weather the interest capping effects by focusing on growing the non-funded income,” it said.
Equity, which also operates in neighbouring Uganda, Tanzania, Rwanda and other markets in Africa, said the contribution of those subsidiaries to the group’s pretax profit doubled to 10 percent.
$1 = 103.1000 Kenyan shillings Reporting by Duncan Miriri; Editing by Susan Fenton