Equity Group’s Half-year profit drops by 24 percent

Equity has announced its half year results for the period ended 30th June 2020 reflecting a 24% decline in profitability from Kshs.12.0 billion to Kshs.9.1 billion for the corresponding period the previous year.

Net interest income went up 17% to Kshs.24.6 billion up from Kshs.21.1 billion the previous year driven by a 22% growth in loan book from Kshs.320.9 billion to Kshs.391.6 billion. Non-funded income declined by 3% from Kshs.14.5 billion to Kshs.14.1 billion as a result of the waiver of mobile transaction fee in Kenya since April 2020 to drive behavior change towards virtual banking enabled by mobile technology; and lower transactional activity given weak economic activity. Customers shied from use of Merchant Banking and Agency Banking as transactional channels with merchant transactions stagnating as commissions declined by 10% from Kshs.103.3 million to Kshs.93.3million as agency cash in cash out transaction volume declined by 20% from Kshs.54.031 billion to Kshs.42.975 billion with resultant commission declining by 25% from Kshs.1.055 billion to Kshs.789 million. However, retail digital commerce payments Eazzy Pay and Pay with Equity recorded 49% growth in cumulative number of transactions from 1.152 million to 1.719 million transactions as value of transactions grew by 52% to reach Kshs.9.8 billion up from Kshs.6.4 billion.

Total costs increased by 44% to Kshs.26.7 billion up from Kshs.18.6 billion driven by a 15-fold increase in loan loss provision which increased to Kshs.7.7 billion up from Kshs.500 million in recognition of portfolio risk associated with the adverse disruption of COVID-19 health pandemic control, management and containment measures and resultant economic shocks and disruptions of supply chains by economic lockdowns. “Despite NPLs showing a minimal decline from 10.9% to 10.7% quarter on quarter basis and stabilizing below the 13.1% industry average, prudence dictated that we adopt a conservative humble approach in recognizing the risk of uncertainty Covid-19 has imposed on the operating environment” said Dr. Mwangi, The Group Managing Director and CEO while releasing the results.

EGH balance sheet grew by 17% from Kshs.638.7 billion to Kshs.746.5 billion driven by 19% growth in customer deposits to Kshs 543.9 billion from Kshs 458.6, funding that was deployed to grow loans to customers by 22% and investment in Government securities by 20%. Regional subsidiaries grew faster increasing their contribution to the Group profitability to 28% up from 26% same period the previous year. Post balance sheet date, the Group completed the acquisition of 66.53% of BCDC the second largest bank in DRC paving way for the Group to achieve a systemic position after merger and amalgamation of the two subsidiaries in DRC.

To cushion liquidity shocks the Group maintained a liquidity of 54% while Kenya recorded 59.4% liquidity ratio.

The performance as at 30th June 2020 reflects the implementation of both defensive and offensive strategies to respond to the COVID-19 situation that has transformed the operating environment.