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Equity Bank Holdings Ltd recorded a 14 per cent decline in net profit for the three months to March 31, 2020. PHOTO | DENNIS ONSONGO | NATION MEDIA GROUP The Nairobi Securities Exchange-listed lender saw its profit after tax fall to Ksh5.28 billion ($52.8 million) from Ksh6.15 billion ($61.5 million).

The management took a conservative approach to surviving the economic downturn by increasing loan loss provision by Ksh3.11 billion ($31.1 million) from Ksh409.89 million ($4.09 million) in the same period last year.

Equity Bank Holdings Ltd recorded a 14 per cent decline in net profit for the three months to March 31, as a result of increased loan loss provisioning to cushion businesses against uncertainties caused by the Covid-19 pandemic.

The Nairobi Securities Exchange-listed lender saw its profit after tax fall to Ksh5.28 billion ($52.8 million) from Ksh6.15 billion ($61.5 million). The management took a conservative approach to surviving the economic downturn by increasing loan loss provision by Ksh3.11 billion ($31.1 million) from Ksh409.89 million ($4.09 million) in the same period last year.

Equity’s regional subsidiaries in Uganda, Tanzania, Rwanda, South Sudan and the Democratic Republic of Congo accounted for a combined 26 per cent of the group’s bottom line, compared with 17 per cent in the same period last year.

The Covid-19 pandemic has hit global economies, paralysing economic activities and pushing households into financial distress.

“The global Covid-19 pandemic has mutated into a global economic crisis, occasioned by a sudden standstill of economic activity as a result of the global lockdown. This has introduced unprecedented uncertainty within the global financial systems prompting us to adopt a conservative approach, fortifying our balance sheet and assuring ample liquidity to support our customers,” said Equity Group chief executive James Mwangi.

According to Mr Mwangi, the Group’s business model of high-volume low margins with non-funded income contributing 42 per cent of total revenues and a low cost of funding enables the bank to navigate a period of compressed interest margins on loans and advances and other interest earning assets.

The group’s total income grew 13 per cent to Ksh19.85 billion ($198.5 million) from Ksh17.61 billion ($176.1 million), with regional subsidiaries’ combined contribution to total revenues increasing to 30 per cent from 28 per cent in the same period last year.

According to the group’s unaudited financial statements released last week, total interest income grew 14 per cent to Ksh15.42 billion ($154.2 million) from Ksh13.49 billion ($134.9 million) and […]

Dr. James Mwangi, the Equity Group CEO and Managing Director (PHOTO/File). NAIROBI – The Board of Directors of Equity Group Holdings Plc, one of the largest bank on the Nairobi Securities Exchange by market capitalization, has withdrawn its recommendation of a Ksh. 9.5 billion dividend payout to its shareholders. The withdrawal of the dividend payout speaks to the Board’s assessment of risk, post balance sheet date of December 31, 2019 and of the Group’s approach to prudent risk mitigation and management.

The COVID-19 global health pandemic has led to a great lockdown which has induced a complex and multi-faceted global crisis of health, economic, and social challenges of an unprecedented magnitude. The pandemic’s effects have created a significant drop in the global GDP, and a substantial loss of employment leading to an economic recession which economists are projecting will evolve into a global depression worse than the Great Depression of the 1930’s.

The global economic outlook has worsened considerably since the beginning of the year. The United Kingdom has entered a severe recession last experienced in the 17th Century, while the United States unemployment rate is expected to reach 25% by the end of 2020 with 39.6 million people already unemployed. The most recent global growth projections from the International Monetary Fund (IMF) have revised the global economic outlook to below the 2.9% achieved in 2019 from an initial projection of 3.3% to -3.0% (negative 3.0%) of GDP growth rate, which they feel is optimistic. Cautiously, the IMF also projects that if the pandemic fades in the second half of 2020 and if policy actions taken around the world are effective in preventing widespread bankruptcies, extended job losses, and system-wide financial strains, global growth could rebound to 5.8% in 2021.

“The Equity Group Holdings Board took a conservative approach that recognizes the emerging unquantified risk of the pandemic and opted to preserve capital in the face of the prevailing uncertainty,” said Dr. James Mwangi, the Group CEO and Managing Director. He added that, “A strong capital and liquidity position gives us the strength and capacity to cushion our business and accommodate and walk with our customers during these challenging times”.

Further, the Board would like to encourage the Bank’s customers to seek opportunities to innovate in the age of the pandemic, and to keep looking for growth possibilities even in this trying time in order to preserve cash and capital, and to not […]

Dar es Salaam. C RDB and NBC banks have been shortlisted for Africa’s premier bankers’ awards which celebrate excellence in banking and finance on the continent.

The two Tanzanian banks are among six from the East African region that were nominated as finalists for the top honours in the African Bankers of The Year Awards for 2020. The others are Kenya’s Equity bank, Kenya Women Microfinance Bank, Absa of Uganda and East African Development Bank.

Winners in the 11-category list will be unveiled on 26 August this year during the Annual Meeting of the African Development Bank (AfDB) in Abidjan, Côte d’Ivoire. The AfDB ceremonies will, however, be clouded by the unravelling investigation on the bank’s President, Dr Akinwumi Adesina, who has been accused of corruption and abuse of office by his own staff.

Dr Adesina was expected to be re-appointed to the role for a second five-year term during the annual meeting but his fate now depends on the direction that the investigation takes.

But that investigation notwithstanding, the continent’s who is who in the financial circles will gather to cheer peers celebrated for pulling some of the mega and life changing deals in the quest for Africa’s development. The awards also recognise reforms, rapid modernisation, consolidation, integration and expansion of Africa’s banking and financial system.

In Tanzania, CRDB’s two tickets to the finals was courtesy of the Standard Gauge Railway (SGR) and the Sh6.6 trillion Rufiji Hydroelectric (Nyerere Dam) projects. The bank will compete in the Infrastructure Deal of the Year and the Energy Deal of the Year. CRDB and other local banks put together a funding mechanism for the two signature projects.

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The amount that the bank individually pumped into the two projects was not made public. Efforts yesterday to get comment from the bank’s officials were futile. However, in April this year, CRDB and United Bank for Africa (UBA) provided $737.5 million (about Sh1.7 trillion) in guarantee to the joint venture comprising Egyptian firms Arab Contractors and Elsewedy Electric for the execution of the Rufiji Hydroelectric dam project.

CRDB and NMB Banks also teamed up with the African Trade Insurance Agency (Ati) to issue guarantees for the SGR infrastructure project which aims to facelift the 1,800-km central railway line to a modern landmark.

For its part, NBC was nominated in the Small and Medium Sized (SME) Bank of The Year category which would make its maiden entry this year. NBC prides […]

The East African Cables manufacturing plant in Nairobi. The company has been making losses for the past four years. FILE PHOTO | NMG The agreement involves a restructure of the outstanding facilities by the bank under a new long term facility.

EA Cables is grappling with a huge debt portfolio amounting to Ksh3.55 billion ($35.5 million), which has eroded cash flows pushing the firm into a negative working capital position of Ksh3.27 billion ($32.7 million).

According to the firm’s 2018 annual report, it owed banks a total of Ksh3.55 billion ($35.5 million) as at December 31, 2018, of which Ksh2.56 billion ($25.6 million) was borrowed from Standard Chartered Bank Kenya and $5.32 million from Standard Chartered Bank Tanzania.

East African Cables has reached an agreement with the State Bank of Mauritius (SBM) over the restructuring of Ksh285 million ($2.85 million) debt that is due and payment on demand, giving the company a lifeline in its recovery efforts.

The agreement means the lender withdraws a liquidation petition against the firm, a Nairobi Securities Exchange-listed firm that has been making losses since 2015.

“The agreement involves a restructure of the outstanding facilities by the bank under a new long term facility and security arrangement,” said company secretary Virginia Ndunge in a public notice last week.

“The withdrawal of the petition is a significant step towards the company’s turnaround plan that includes strengthening of the balance sheet, operational improvement and having the right funding structure for growth and profitability.”

Debt portfolio

In January 2020, the firm announced that the board had been in discussion with all the lenders.

EA Cables is grappling with a huge debt portfolio amounting to Ksh3.55 billion ($35.5 million), which has eroded cash flows pushing the firm into a negative working capital position of Ksh3.27 billion ($32.7 million).

According to the firm’s 2018 annual report, it owed banks a total of Ksh3.55 billion ($35.5 million) as at December 31, 2018, of which Ksh2.56 billion ($25.6 million) was borrowed from Standard Chartered Bank Kenya and $5.32 million from Standard Chartered Bank Tanzania.Other loans included Ksh161.52 million ($1.61 million) from Ecobank Kenya Ksh285.01 million ($2.85 million) from SBM and Ksh3.82 million ($38,200) from Credit Bank Kenya Ltd.According to the report, out of the Ksh3.55 billion ($35.5 million) that was due for repayment on December 31, 2018, loans amounting to Ksh1.6 billion ($16 million) relating to Standard Chartered Bank Kenya and Standard Chartered Bank Tanzania were […]

Kenya Airways planes at the JKIA in Nairobi. FILE PHOTO | NMG The global aviation trade association has renewed its call for government to aid the industry, which is on the verge of collapse as the impact of the Covid-19 crisis deepens.

The International Air Transport Association (IATA) has said African countries, including Kenya, Ethiopia, South Africa, Nigeria and Tanzania, will be hit hardest due to severe travel restrictions that have lasted three months, costing the airlines revenues running into billions of shillings.

The association is calling for the rescue of the airlines through a mix of direct financial support, loans, loan guarantees, support for the corporate bond market and tax relief.

Kenya is expected to lose Sh168 billion in contribution to the economy and 3.5 million passengers, representing a 50 per cent reduction in passenger demand. This is expected to result in a Sh76.65 billion revenue loss while risking 193,300 jobs at the national carrier Kenya Airways (KQ) and Jomo Kenyatta International Airport (JKIA).

Ethiopia, on the other hand, is expected to lose 2.5 million passengers, resulting in a Sh45.15 billion revenue loss and risking 500,000 jobs.

Kenya had already lost Sh56.7 billion and had about 137,965 jobs affected as of April 2, the association said.

“To minimise the impact on jobs and the broader African economy it is vital that governments step up their efforts to aid the industry,” IATA said.

The new alert comes after KQ announced it will seek a government bailout after grounding its aircraft due to the ban on international flights, signalling a cut in revenue. KQ chief executive officer Allan Kilavuka said the airline is still waiting for government action.

“We are still talking with the government. In terms of time frame, it’s the Ministry of Transport and National Treasury to decide,” he said in a phone interview.

IATA is also appealing to development banks and other sources of finance to support Africa’s air transport sectors.

“Airlines in Africa are struggling for survival. Air Mauritius has entered voluntary administration, South African Airways and SA Express are in business rescue, other distressed carriers have placed staff on unpaid leave or signalled their intention to cut jobs,” it said. “More airlines will follow if urgent financial relief is not provided.”KQ has announced that top executives and employees will take a pay cut of up to 75 per cent of their gross salaries as part of mitigation measures to save the firm. The airline is […]

Kenya Airways chief executive Allan Kilavuka. FILE PHOTO | NMG Kenya Airways #ticker:KQ has not been operating cargo flights from Nairobi for the last two weeks as demand for freight and growth in capacity stiffens competition, a move that will hit the airline, which was banking on the service to supplement its income.

Chief executive Allan Kilavuka said there is increased capacity and low demand compared to before that is why the carrier has not been operating cargo flights.

At the moment, there are close to 12 cargo airlines operating from Jomo Kenyatta International Airport to different destinations in the world, a significant rise from less than five that were operational after the travel restriction brought about by Covid-19 was put in place.

“This (a lack of cargo flights) means less income and we will struggle even more than we were before,” Mr Kilavuka told the Business Daily.

“There is a lot more capacity now and demand is lower so there is less opportunity than before,” he added.

Mr Kilavuka said increased capacity had seen a drop in freight charges, meaning that it could not be profitable at the moment for KQ to operate long haul cargo flights using the passenger aircraft.

Kenya Airways does not have long-range cargo aircraft and the two B737F that the carrier owns can only do regional services and there is no too much cargo to transport intra-Africa.

The weekly capacity at the airport is now 1,800 tonnes against the volumes of 1,500 tonnes, meaning the supply has outstripped the demand.

The national carrier had started doing several cargo trips from Nairobi to Europe and Asia using passenger aircraft to generate some revenue to help the carrier meet some of its financial obligations such as paying off utility bills.

Increased capacity at the JKIA has pushed the cost of freight to Sh236 for a kilo from a high of Sh525 for the same quantity previously.

However, the cost is still high when compared to a normal period when a kilo of cargo goes for a dollar.The move comes as a boost to players in the horticulture industry who have been grappling with high charges owing to limited capacity to ferry their produce to European country.Some of the airlines flying to Nairobi at the moment include Qatar Airways, Ethiopian Airlines, Emirate Cargo, Lufthansa, Martinair, Etihad, British Airways and KLM among others.KQ reported a Sh12.9 billion loss for the financial year ended December 2019 up from […]

East African Cables plant in Nairobi. FILE PHOTO | NMG East African Cables #ticker:CABL has reached a loan restructure agreement with SBM Bank Kenya, a move that has seen the lender retreat from its move to liquidate the Nairobi Securities Exchange-listed firm over a Sh285 million debt.

The cables manufacturer says the maturity date of the loan has been postponed and the collateral changed, without giving further details.

“East African Cables Plc is pleased to announce that the company has reached a debt settlement and restructure agreement with SBM Bank Kenya Limited resulting in withdrawal of the liquidation petition against the company,” EA Cables said in a statement.

“The agreement involves a restructure of the outstanding facilities by the bank under a new long-term facility and security arrangement.”

SBM is among the banks that had taken measures to recover their loans on which the firm had defaulted due to a mix of losses and sales decline in the past five years.

Ecobank Kenya in February appointed a receiver manager to take over certain assets of the cables manufacturer, which had stopped servicing a Sh161 million loan from the lender.

Ecobank advanced the cash to the company through debentures — an agreement in which the borrower pledges several assets to the creditor as collateral.

The value of the assets taken over by the receiver was not immediately clear. EA Cables is part of a group of companies owned by investment firm TransCentury #ticker:TCL and which have struggled to pay various creditors including bondholders and banks.

The cable manufacturer’s biggest lenders, the Kenyan and Tanzanian branches of Standard Bank Plc, last year agreed to take a haircut of Sh1.56 billion and were paid Sh1.6 billion as final settlement.

EA Cables took new loans from Equity Bank #ticker:EQTY and used the amounts to pay off StanChart #ticker:SCBK. The firm had also disclosed that it was negotiating with Equity Bank to also settle the remaining claims by SBM and Ecobank but the talks have stalled.

NAIROBI (Reuters) – Standard Chartered Bank Kenya has adjusted the terms of more than 8 billion shillings ($75.4 million) of its loans to individuals and businesses – about 6% of the total – to help them weather the impact of COVID-19, it said on Wednesday.

Lenders in the East African nation have so far restructured 81.7 billion shillings in loans since the central bank allowed them to offer relief to distressed borrowers on March 18, the central bank said last week.

StanChart Kenya’s Chief Executive Kariuki Ngari said some borrowers whose businesses or earnings have been hit by the pandemic were struggling with cash flows, creating the need for them to restructure their loan repayments.

Under a deal unveiled by lenders and the central bank, struggling individuals and firms can take a three-month repayment holiday, lengthen the tenure of their loans, or opt to just pay the interest for a period of time.

The relief also applies to credit card debt and mortgages, said StanChart Kenya, which is controlled by Standard Chartered Plc and is one of the top lenders in the country.

Nearly a third of the restructured loans for the entire banking industry belong to the tourism sector, which has ground to a halt in the wake of the pandemic, the central bank said.

Other sectors which have been affected include building and construction, trade, and manufacturing, as well as small and medium enterprises.

The central bank also gave lenders some flexibility in terms of classifying loans whose borrowers’ ability to repay them on time has been hindered by the pandemic.

($1 = 106.1500 Kenyan shillings)

Reporting by Duncan Miriri; Editing by Jan Harvey

Jubilee Holdings Limited, East Africa’s largest insurance group, has reported a 9.9 per cent growth in the Financial Year 2018/2019.

The company, with operations in Uganda, Kenya and Tanzania, saw its insurance premiums increase from Ksh34.75 billion (Shs1.2 trillion) to Ksh38.19 billion (Shs1.3 trillion).

The statistics released by the board yesterday point to a rise in the business from 13.6 per cent to Ksh15.89 billion (Shs563.5 billion), which included Individual Life growth of 16.3 per cent and Group Life growth of 19.4 per cent.

Mr Nizar Juma, the firm’s group chairperson, attributed the growth to the investment in providing value to its customers as well as its shareholders.

"We are honoured by the faith our valued customers have bestowed upon us to enable us to contribute towards positively impacting their lives through our products and services," he said.

"This transformation has taken well over a year and has resulted in the business shedding loss-making business and relationships as the focus is now firmly on business quality and sustainability," Mr Juma stated.

In the report, the firm posted a growth of 8.9 per cent from Ksh9.94 billion (Shs352.4 billion) to Ksh10.82 billion (Shs383 billion) with impressive underwriting profit of Ksh721 million (Shs25.5 billion) from all countries.

Revenues from jubilee general business grew by 6 per cent to Ksh11.48 billion (Shs407 billion) but with an underwriting loss of Ksh480 million (Shs17 billion).

The regional chief executive officer, Dr Julius Kipngetich, said the company has taken several measures to ensure continuation of service to all our clients, which include the re-launch its online portal which will be used by its clients to purchase motor insurance online and have a digital motor certificate delivered to them via email.

– Equity, which restructured 25% of its loan book (KSh 92 billion), said the announcement of the dividends was made when the economy was doing better

– The lender joined the list of other banks such as NCBA Group and Standard Chartered which also postponed cash distributions due the effects of COVID-19

– It was the first time the second largest bank by assets in the country skipped paying dividends since it was listed on the Nairobi Securities Exchange (NSE) in August 2006

The coronavirus pandemic continues to take its toll on businesses globally and locally amid uncertainty on when it will end as countries try to re-open economies.

In Kenya, Equity Bank Group has cancelled a KSh 9.4 billion dividend payout to its shareholders citing COVID-19 fears as it sought to conserve cash.

Equity Group said the coronavirus pandemic had affected its operations. Photo: Equity Bank.
Source: UGC

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Equity, which restructured 25% of its loan book (KSh 92 billion), said the announcement of the dividends was made when the economy was doing better (before the pandemic) but times changed. “Accordingly, the board has passed a resolution withdrawing the proposed dividend recommendation and instead will be recommending to the shareholders that no dividend is paid for the financial year ended 31st December, 2019,” "Therefore, the shareholders of the company and other investors are advised to exercise caution when dealing in the company’s ordinary shares on the Nairobi Securities Exchange, the Uganda Securities Exchange and the Rwanda Stock Exchange," Equity said in a statement. “ The lender had proposed a dividend payout of KSh 2.50 per share and joined the list of other banks such as NCBA Group and Standard Chartered also postponed cash distributions.

It was the first time the second largest bank by assets in the country skipped paying dividends since it was listed on the Nairobi Securities Exchange (NSE) in August 2006.

TUKO.co.ke earlier reported that oil company, Shell, revealed shareholders would receive a fraction of their dividends due to the effect of the coronavirus.
This was the first time the company announced such a move since the second world war as its net income fell by 46% to $2.9 billion (KSh 290 billion) for the first quarter of 2020. Do you have a groundbreaking story you would like us to […]