NAIROBI May 25 (Reuters) - Equity Group Holdings, Kenya's second largest bank by assets, said on Thursday its pretax profit fell 5 percent to 6.9 billion shillings ($66.87 million) in the first quarter due to difficult conditions in its home market.
Equity Group Holdings reported a 15 percent drop in net interest income to 8.9 billion shillings, CEO James Mwangi told an investor briefing.
Mwangi said this was balanced out by a rise in non-funded income - from commissions and other activities such as forex trading - to 6.3 billion shillings from 5.2 billion shillings, helped by its mobile banking services.
Equity also has operations in the Democratic Republic of Congo, Uganda, Rwanda, Tanzania and South Sudan.
It said net loans fell to 261.9 billion shillings from 275.02 billion shillings in the same period in 2016, with Kenya's contribution to total loans falling to 79.6 percent from 83.4 percent.
In March, Mwangi said banks in the country were facing turbulence due to the government's cap on commercial lending rates and the impact of a drought.
The government introduced interest rate caps in September last year saying banks had high returns and they were not passing those benefits onto customers. The cap limits interest rates to 4 percentage points above the central bank rate, which stands at 10 percent.
"A cautious approach in credit underwriting because of inability to price risk saw the loan book decline by 5 percent. The increase in funding was invested in government securities, which on a risk adjusted basis currently have yields similar to loans," Mwangi said.
He said the group's ratio of non-performing loans stood at 7.1 percent of the total, from 3.8 percent in first quarter 2016, compared with the 9.7 percent recorded for the industry in the period to end-March.
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