Nairobi – Equity Bank posted a 26 per cent jump in net profit in the nine months ended September, helped by increased lending and fees on transactions.

The lender’s net profit in the period stood at Sh11.2 billion (about Rwf89.6 billion) compared to Sh8.9 billion (about 71.2 billion) a year earlier. Its share price has gained 45 per cent over the past one year to trade at Sh50.7 (Rwf405.6).

The earnings were boosted by its subsidiaries in Uganda, Tanzania, South Sudan and Rwanda whose combined net profit of Sh1 billion (about Rwf8 billion) represented an 80 per cent increase from Sh580.9 million (Rwf4.65 billion) the year before.

The performance came as the bank’s total loan book expanded to Sh206.6 billion in September, up from Sh171.3 billion in December last year and Sh158.5 billion the previous September.

Equity’s larger loan book saw its total interest income rise 10.5 per cent to Sh26 billion in the nine months to September though the bank’s interest margins fell on the back of lower interest rates.

Average commercial bank lending rates stood at 16.6 per cent in the period, down from 17.4 per cent a year earlier according to Central Bank of Kenya.

The falling rates has seen loan book growth and costs of deposits emerge as key profit drivers, with Equity incurring higher cost of funds.

Its interest expenses rose faster than interest income at 16.8 per cent to Sh4.4 billion, thinning its net interest margins.

Equity said its net interest margin has been dropping steadily in the past four quarters, from a high of 12.2 per cent in the three months ended December to 10.9 per cent in the three months to September.

Its operating expenses, including staff costs, also rose six per cent to Sh18.8 billion.

The bank, which says it now has 9.2 million customers, saw earnings from fees, commissions and dividends rise 23 per cent to Sh12.9 billion.

About half of the amount or Sh6.5 billion came from the bank’s charges on services such as withdrawals, indicating the large earnings in the retail banking segment where Equity is the largest player.

"Equity’s revenues from other fees and commissions … appear to be growing faster than the fees and commissions income on loans and advances which has been a traditional income driver for commercial banks,” the lender’s CEO James Mwangi said.