Africa Banking Economy Ethiopia

Equity Group confident of growth in Ethiopian market

Equity Group expects to make an impact in the Ethiopian market in 10 years due to the country’s protectionism.

The Kenyan based lender opened its representative office in Ethiopia in June 2019, as part of its Africa expansion and amid competition from Kenya Commercial Bank that is also eyeing external markets.

The Ethiopian banking market is dominated by two state-owned banks – Development Bank of Ethiopia and Commercial Bank of Ethiopia that control 70 per cent of the market share.

In recent Africa’s Top 100 Banks 2019, foreigners are still not allowed to own shares in Ethiopian banks, although this is being relaxed into accommodate Ethiopians with foreign passports.

Despite the country being restrictive on its financial and telecommunications sectors, Equity sees it as promising market.

“It will take about 10 years to disrupt the Ethiopian market and become a leader,” the Group’s chief executive James Mwangi said during the release of lender’s Q3 financial results.

“We have started understanding intricacies of the place, skills distributions, analysing and creating partnerships.”

KCB bank also opened its representative office in the country in 2015 has recently said it is looking to make its entry through a partnership with a domestic bank or opening a fully-fledged subsidiary.

Equity bank has been eyeing the country in a course to establish a full presence in 10 African countries.

It already has operations in Uganda, Tanzania, South Sudan, Rwanda and the Democratic Republic of Congo.

In the nine months to September, the subsidiaries’ assets recorded a year on year growth of 26 per cent to Sh191.8 billion.

This compared to 21 per cent growth in Kenya, though with the higher asset value at Sh511.83 billion.

“The regional expansion strategy, diversification, management of sovereign risks and concentration has paid up as subsidiaries growth continue to go up,” Mwangi added.

Uganda, Rwanda and DRC had a return on equity higher than the cost of capital.

During the period, the lender registered a 10 per cent growth in profit after tax to Sh17.46 billion from Sh15.83 billion in the third quarter supported by increased interest income from lending.

The Group’s net interest income grew by 10 per cent to Sh32.29 billion from Sh29.47 billion.

Non-funded income grew by 14 per cent to Sh22.54 billion up from Sh19.83 billion to lift total income by 11 per cent to Sh54.83 billion up from Sh49.3 billion.

The results fall days after the repeal of removing the cap on interest rates charged on loans offered by commercial banks.

“The three years of interest rate cap gave us an opportunity to reinvent ourselves. The removal can only be a bonus and is unlikely to change the bank as the from a strategic perspective but lift us to the next level,” Mwangi said.

Source: The Star

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