Equity ventures into asset management to ‘lock’ customer deposits

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Equity Group Holdings has acquired an asset management license, joining a growing list of banks seeking to lock in customer deposits through investment in high-earning schemes.

The lender disclosed that it was setting up a stand-alone asset management unit to woo customers seeking higher returns than those offered for fixed deposit accounts.

“We are working on setting up asset management because we have read the market. The market in the past has relied on banks' savings accounts, but it looks like now the market wants high-earning assets as opposed to savings,” Equity Group chief executive James Mwangi said.

“We've obtained a license for asset management, and we think it will be a formidable business, given the brand of Equity, the infrastructure for distributing assets and the IT backbone that we have and our ability to distribute assets that are manufactured even globally,” he added.

This will be a departure from the current group structure where its collective investment schemes(CIS) are operated under its subsidiary, Equity Investment Bank.

A CIS—commonly known as a unit trust or mutual fund—pools money from many people to buy a shared portfolio of assets such as stocks, bonds, and bank deposits. The funds are managed on behalf of investors by a professional fund manager.

Equity joins other lenders such as Absa Bank, Standard Chartered Kenya, Ecobank Kenya, KCB and I&M Group that have asset management units.

Commercial banks' average return on savings accounts was 3.32 percent in June, as per the Central Bank of Kenya data, while fixed deposits were offering an average return of 6.84 percent.

Banks usually have a minimum amount for fixed deposits, whose rate is negotiated based on the amount and duration the customer locks the savings with the bank.

Money market funds, which invest primarily in Treasury bills and commercial bank fixed deposits, are offering an average annual return of 8.4 percent, which is lower than that offered by riskier equity funds and special funds. Equity’s unit trust is offering an annual return of 5.22 percent under its money market fund.

The higher returns offered by the collective investment schemes have seen bank customers withdraw savings held in commercial banks to invest with special funds in a move likely to push up the cost of funds for the lenders.

Total assets under management held by the special funds and the money market funds stood at Sh851.7 billion as at the end of March this year, being a 12.6 percent growth from Sh756.3 billion in December 2025, according to the Capital Markets Authority.

Deposits held by commercial banks grew at a slower pace of 3.8 percent over the same three-month period to Sh6.5 trillion.

Commercial banks that have gone into asset management have recorded growth from their units, signalling opportunities for the lenders.

Absa Bank reported a 40 percent growth in its assets under management portfolio to Sh49 billion in the 12 months to June this year.

Assets under Management will provide Equity Group with additional revenue streams from non-banking activities, which include insurance, investment banking and fintech.

Reporting originally appeared via Business Daily. Read the full source for additional context.