Hunderwear wrote:the deal wrote:
Equity Bank needs to change tactic...interest income needs to start contributing more to total operating income, with non interest income contributing 47% of total operating income I don't think that segment can grow further, depending on how fast the regional subsdiaries grow, Equity Bank will struggle to replicate the 50+% growth we have seen in the past 5 years cos the Kenyan operations have reached some form of maturity.
=...They have a new frontier in the name of corporate loans.They got into a deal with NCC early this year for a 5bln loan and yesterday into another with RVR.
This is a change of tactic and ths is likely to lower the cost of lending in the longterm. Corporate loans are costly to manage in that they are long term which means a Bank must be well capitalized to tie deposits in long term loans (5-15yrs)as is the case with the RVR loan.
The bank should streamline its SME niche such that the cost of deposit is reduced and the appraisal and risk management is strengthened.
We have unexploited market in SMEs and Equity's clout on this market is enviable the problem is that getting efficient SMEs is hard work, most businesses are family owned and lack basic book keeping skills, so lending mostly depends on their account movements which is inadequate in assessing business viability and growth potential.
I dont think equity can comfortably service corporates clients given its stingy interest payments to its depositors.
'......to the acknowledgment of the mystery of God, and of the Father, and of Christ; 3 In whom are hid all the treasures of wisdom and knowledge.' Colossians 2:2-3