- The lender’s interests in the subsidiaries remained 100% unchanged.
- The parent company’s capital support came amid economic disruption caused by the Covid-19 pandemic which saw lenders restructure a substantial portion of their loan books.
Equity Group #ticker: EQTY invested an additional 3.4 billion shillings in its Ugandan and Tanzanian subsidiaries during the year ended in December to increase the capital of the units.
The lender’s interests in the subsidiaries remained 100% unchanged. The parent company’s capital support came amid economic disruption caused by the Covid-19 pandemic which saw lenders restructure a substantial portion of their loan books.
“On March 17, 2020, an additional capital of 226,000 new shares with a nominal value of TSh 100,000 was issued and paid by Equity Group Holdings Plc (EGH) to Equity Bank Tanzania Limited for a consideration of 22.5 million. dollars (2.36 billion shillings). », Declares Equity in its last annual report.
“On March 17, 2020, an additional capital of 345,000 new shares with a par value of Ush 100,000 was issued and paid by EGH to Equity Bank Uganda Limited for a consideration of $ 10 million (1.05 billion shillings ). “
These measures brought the cumulative investment of the Nairobi Securities Exchange-listed company in the Tanzania unit to 6.2 billion shillings, while the capital of the Ugandan subsidiary soared to 6 billion shillings.
The Tanzanian subsidiary reported a pre-tax loss of 426 million shillings in the year ended December, exceeding it by 411 million shillings a year earlier.
Most lenders in Tanzania have offered financial assistance to their clients, especially small and medium-sized businesses, following the economic hardships caused by the pandemic.
The measures included payment holidays lasting three to six months in addition to restructuring loans to extend repayment periods.
The Ugandan unit, on the other hand, increased its profit before tax by 54.6 percent to 2.3 billion shillings from 1.4 billion shillings. Lenders in Uganda have also offered credit relief to customers, such as repayment holidays of up to 12 months.
Equity restructured a total of Sh171 billion in loans across its regional operations in the wake of the pandemic.
The capital support to subsidiaries was part of Equity’s total investment of 14.8 billion shillings in the regional market last year, including acquisitions in the Democratic Republic of Congo (DRC).
“The strategy of regional expansion and diversification of the group’s activities resulted in double-digit growth in all subsidiaries with an increase in profit before tax contribution of 28% against 18%, validating the group’s decision of s ‘expand into the East and Central Africa region,’ Equity said in the report.
This large investment is part of the reason the bank suspended dividend payments for two years.
Equity initially ignored dividends for the year ended December 2019 when it canceled a proposed payment of 2.5 shillings per share. The bank maintained the freeze the following year, saving a cumulative 18.8 billion shillings.
Equity achieved a net profit of 20.1 billion shillings last year, down 10.9% from 22.5 billion shillings in 2019, as the increase in the provision for defaults related to coronaviruses has had adverse consequences.
The lender says it has chosen to reinvest its profits to grow the business, noting that an aggressive expansion of the loan book requires an increased capital commitment.
In addition to keeping all profits, the bank also took billions of shillings in long-term loans to further bolster its additional capital.