(Bloomberg) -- Equity Group Holdings Plc, Kenya’s biggest bank by market value, plans to increase lending by as much as 5% in its home market in the second half of the year, after the government signaled plans to reduce interest rates.
Last week Kenya’s central bank surprised markets by cutting its benchmark interest rate for the first time since early 2020, providing some respite for consumers increasingly frustrated by the high cost of living. The monetary policy committee lowered the key rate to 12.75% from 13%.
“Our plan — now that we’ve seen the signaling effect from the central bank — is to increase our intermediation,” Chief Finance Officer Moses Nyabanda said Monday after the lender published earnings. “In the first half, our lending had decreased by 3%. We’ve given guidance that we expect our loan book to grow between 2% and 5% in the second half.”
The lender plans to lower commercial interest rates, Nyabanda said, without giving a figure. Should other banks follow suit, that will likely spur economic activity, he said.
The Nairobi-based bank with operations in six markets in East Africa including Rwanda, Uganda and the Democratic Republic of Congo said its units outside Kenya now account for 47% of total loans and 51% of net income.
Lending by the Kenyan unit declined 7% in the six months through June as investment in government securities with yields as high as 17% locked out the private sector.
The group’s non-performing loans ratio jumped to 12.9% from 9.8% a year earlier. The lender projects a lower bad-debt ratio by end of the year, according to Special Assets Director Christine Browne. “We’re looking at different strategies to ensure that by the end of the year, we close below 10% at the group level,” she said.
Equity’s shares have climbed more than 18% this year, making them one of the best performers in the 63-member All-Share index that’s gained 11% during the period.
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