KENYA – Financial services group Equity Group injected an additional US$31.6 million in its Ugandan and Tanzanian subsidiaries in the year ended December 2020 to boost the regional units’ capital.
The Nairobi Security Exchange listed lender’s stakes in the subsidiaries remained unchanged at 100 percent.
The capital support from the parent company came amid economic disruption brought by the Covid-19 pandemic that has seen lenders restructure a substantial part of their loan books.
“On March 17, 2020, additional capital of 226,000 new shares with a par value of US$43 was issued and paid by Equity Group Holdings Plc (EGH) to Equity Bank Tanzania Limited for a consideration of US$22.5 million,” Equity said in its latest annual report.
“On March 17, 2020, additional capital of 345,000 new shares with a par value of US$43 was issued and paid by EGH to Equity Bank Uganda Limited for a consideration of US$10 million”
The moves raised firm’s cumulative investment in the Tanzania unit to US$57.7 million while the capital in the Ugandan subsidiary jumped to US$55.8 million.
The Tanzanian subsidiary reported a pre-tax loss of US$4 million in the year ended December, widening it from US$3.8 million a year earlier.
Most lenders in Tanzania offered financial relief to their customers, particularly small and medium-sized firms, in the wake of the economic difficulty brought by the pandemic.
The measures included payment holidays lasting three to six months besides restructuring of loans to extend repayment periods.
The Ugandan unit on the other hand raised its pre-tax profit 54.6 percent to US$21.4 million from US$13 million with lenders in Uganda also offering credit relief to clients such as repayment holidays of up to 12 months.
“The group’s strategy of regional expansion and business diversification resulted in a double-digit growth across the subsidiaries with an increased profit before tax contribution of 28 percent from 18 percent, validating the group’s decision to expand into the East and Central Africa region”
Equity Group
Equity restructured a total of US$1.6 billion worth of loans across its regional operations as a result of the pandemic.
The capital support to the subsidiaries was part of Equity’s total investment of US$137.7 million in the regional market last year including acquisitions in the Democratic Republic of the Congo (DRC).
“The group’s strategy of regional expansion and business diversification resulted in a double-digit growth across the subsidiaries with an increased profit before tax contribution of 28 percent from 18 percent, validating the group’s decision to expand into the East and Central Africa region,” Equity said in the report.
The heavy investment is part of the reason why the bank has suspended dividend pay-outs for two years.
Equity first skipped dividends for the year ended December 2019 when it cancelled a proposed pay-out of US$0.023 per share.
The lender maintained the freeze in the subsequent year, saving a cumulative US$175 million.
Equity made a net profit of US$187 million in 2020, a 10.9 percent decline from US$209.4 million in 2019 as increased provision for coronavirus-related defaults took a toll.
The lender says it has opted to reinvest its earnings to grow the business, noting that an aggressive loan book expansion requires increased capital commitment.
Besides retaining all the profits, the bank has also taken long-term loans to further bolster its supplementary capital.
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