Equity Group has returned strong quarter one results in a challenging environment amidst the multi-faceted Covid-19 crisis of health, economic disruption, and humanitarian challenges, giving hope of resilience and recovery.
The Group focused on generating and growing non-funded income, treasury efficiency, geographical expansion and business diversification, business transformation through innovation and digitization, balance sheet optimization and agility, asset quality and risk mitigation while pursuing efficiencies and brand development through social impact investment underscoring the performance of the Group.
Interest income grew by 32% while non-funded income grew by 30% to contribute 42% of total income. Regional subsidiaries registered resilience and robust growth to contribute 40% of total deposits and total assets and 23% of profit before tax with Rwanda and Uganda delivering above cost of capital returns.
The Group registered a balance sheet expansion of 54% to reach Kshs.1.07 trillion driven by a 58% growth in customer deposits underpinned by Kshs.140 billion shareholders’ funds. A liquid balance sheet with Kshs.500 billion of cash, cash equivalents and government securities reflect the agility to redeploy funding seamlessly as the economies recover from the adverse impact of the Covid-19 multi-crisis.
The Group changed its strategy to adopt to the changing environment and executed a rapid business transformation that saw 98% of all transactions being digital in count, and 65% of volume by value. “Over the last one year, we have witnessed firsthand as our customers adopted our mobile and internet technology channels on self-service devices making our financial services offering truly a 24-hour service and lifestyle”, said Dr. Mwangi.
“The business has seized the moment and fast-tracked transformation by investing and deploying fintech capabilities of biodata, artificial intelligence, machine learning, analytics and algorithms to support customer personalized product and services, offering wide lifestyle capabilities and global reach and presence” added Dr. Mwangi.
Strong focus on asset quality saw the Group develop an investment portfolio mix that resulted in a market and sectoral diversification across currencies and different geographies. The Group reported a non-performing loan book of 11.3% compared to the industry average of 14.6%. Strong risk mitigation saw NPL coverage stand at 99% from a mix of provisions at 87% and 12% of credit risk guarantees.
Of the 31% of the loan book, or Kshs.171 billion Covid-19 accommodated or rescheduled loan book, Kshs.59 billion has resumed repayment with Kshs. 5 billion fully repaid and Kshs.3 billion behind schedule in repayment. Kshs.66 billion is expected to resume repayment within 6 months by 30th September 2021.
Boosted by market leadership position in terms of balance sheet; market capitalization; customer base; capital base; and reinforced by the accelerated adoption of technologies by customers, a society seeking multi-sensory engagement, shared prosperity, purpose-first business models, the Group has reviewed its 2021 performance outlook upward to a return on equity of between 25% to 30% and return on assets of between 3.6% to 4.3% in an environment predicted by the World Bank and IMF to recover quickly.