A fortnight after Kenya's Equity Bank announced plans to acquire Uganda's largest lender, Uganda Microfinance Ltd, the bank has reported that earnings for for the first quarter of 2008, grew by 81 percent, pushing its liquidity ratio to 74 per cent.

Releasing the results in Nairobi last week, chief executive James Mwangi said that Equity's level of liquidity is significantly high despite growing its loan portfolio by more than double. He added that it was looking to expand to other countries in the region - Rwanda, Tanzania and Southern Sudan - and possibly beyond.

Apart from regulatory endorsements, expansion is likely to pose few challenges for what has become Kenya's fastest growing bank. Equity's impressive performance has defied predictions that the banking sector, like the rest of Kenya's economy, would be hit hard by the post-election violence that rocked the country in January and February, and whose effects are still being felt as inflation soars.

The earnings, standing at Ksh908 million ($14.4 million) are just shy of double what Equity earned for the same period last year. All segments of the bank increased by a similar margin, and projections are that performance for the next quarter will be equally impressive.

After tax profit grew by 80 per cent to Ksh727 million ($11.5 million) from Ksh403 million ($6.3 million). Total operating income recorded a 89 per cent growth to Ksh2.22 billion ($32 million) from Ksh1.17 billion ($18.5 million), with the growth mostly coming from interest income, which increased by 125 per cent to Ksh1.2 billion ($19 million) in 2008.

The bank's total assets grew by 130 per cent to Ksh57 billion ($904 million) up from Ksh25 billion ($396 million) in March 2007, supported by the massive capital injection of Ksh11 billion ($174 million) by Helios EB last December and additional long-term debt of Ksh4.5 billion ($71.4 million).

Non-funded income grew by 63 per cent to Ksh1.1 billion ($17.4 million) from Ksh63 million ($21 million) mainly driven by foreign exchange income and fees on loans and advances. "This growth shows that the bank's recent focus on trade finance and Treasury-bills is paying dividends," said Mr Mwangi.

Mr Mwangi said, "Overall, the bank has recorded a very impressive performance for the first quarter given the uncertainties at the beginning of the year, which resulted in a slowdown of economic activities," adding that the bank anticipates a better second quarter now that there is "a political settlement in place."

Equity has a client base of two million, a figure that was expected to rise significantly after it became an agent of the just concluded Safaricom initial public offer, for which it was financing buyers up to 100 per cent.

Customer deposits grew by 69 per cent to Ksh34.2 billion ($542 million) compared with Ksh20.2 billion ($320 million) in the previous period. The bank attracted a million new customers between March 2007 and December 31.

Equity says that it is seeking increased lending in order to bring down the liquidity ratio to the requisite industry average.

During the period under review, its loans and advances grew by 80 per cent to Ksh24.9 billion ($395 million) up from Ksh13.8 billion ($219 million) in March 2007. Non-performing loans remained at 6 per cent.

The bank opened six new branches, bringing the total in Kenya to 76, compared with 42 in March 2007, employed 1,200 new workers and is planning to open another 150 automated teller machines in anticipation of an increased customer base arising from the Safaricom IPO.

Analysts say that considering that Equity loaned out more than Ksh15 billion ($238 million) to investors buying into Safaricom, the bank is poised to rake in at least Ksh1 billion ($15.8 million) in fees and interest on the IPO loans.