* Sees launch of telecoms arm in May
* Loan book growth boosts pretax profit
* South Sudan operations profitable despite unrest
(Adds telecoms service)
By George Obulutsa
NAIROBI, April 17 Equity Bank of Kenya
will launch a telecoms services arm in a bid to grow its market
share in the fast-growing mobile phone-based financial services
market, it said on Thursday.
Equity, which is Kenya's biggest lender by depositors, said
pretax profit for the first quarter of this year rose by 21
percent to 5.4 billion shillings ($62.14 million), lifted by
growth in its loan book.
The bank, which operates in Uganda, Tanzania, Rwanda and
South Sudan, said its net loans and advances to customers rose
28 percent to 179.3 billion shillings during the period.
James Mwangi, the bank's chief executive, said the company
planned to launch a telecoms arm in mid-May, as part of plans to
expand its services.
"In the not too distant future we will be inviting you to
launch a telecom company," Mwangi told an investor briefing.
He declined to give more details, but telecoms regulator
Communications Commission on Kenya said earlier this month it
had licensed three mobile virtual network operators.
Mobile virtual network operators offer mobile phone services
using the transmission infrastructure of existing telecoms
operators at a fee.
Equity's planned service will build on its existing mobile
banking customers, who number 2.91 million, up from 2.36 million
in March 2013.
"It will be a very good story," Mwangi told reporters after
an investor briefing.
Mobile phone-based financial services have spread in Kenya
since telecoms operator Safaricom launched its M-Pesa
service in 2007, helping the country raise the number of people
with access to formal financial services.
One service run by Commercial Bank of Africa Safaricom -
dubbed M-Shwari - had mobilised over 24 billion shillings in
deposits and lent 7.8 billion shillings by February this year
after it was launched in 2012.
Equity said that despite unrest in neighbouring Sudan, its
operations there managed to return a profit. The ongoing
fighting in the country was however still a concern.
"The first quarter made more profit than the whole of last
year, suggesting that the country is not as bad as people see
it," Mwangi said.
The bank's cost-to-income ratio fell to 48.7 percent in the
first quarter from 50 percent in the same period a year before.
Mwangi said the bank plans to cut the ratio further to 46
percent by the year end.
Its customer deposits rose 18 percent to 206.6 billion
shillings, while gross non performing loans rose to 7.77 billion
shillings from 7.41 billion shillings in the same period in
At 0916 GMT, Equity Bank's shares were up 2.3 percent at 33
"The loan book growth was faster than expected. That was the
biggest story," Kuria Kamau, research analyst at Kestrel
Kamau said Equity was right to pursue a bigger share of the
mobile phone based financial services sector.
"It's a very big opportunity for them, and if well executed,
it will be a game-changer," he said.
($1 = 86.9000 Kenyan Shillings)
(Reporting by George Obulutsa, editing by David Evans)