Equity Group posts 10% growth in Profit After Tax

Equity Group Managing Director and CEO Dr James Mwangi

Equity Group has posted a 10 percent growth in profit after tax in its Q3 financial results. Loans and advances to customers grew by Kshs 60.5 billion to Kshs. 348.9 Billion up from Kshs. 288.4 Billion reflecting a growth of 21% with 75% of the loan portfolio held by enterprises.  67% of the loan portfolio is spread in financing trade, housing, energy, water, transport and communication, tourism, restaurants, and hotels.

The Group’s balance sheet grew by 21% to Kshs. 677 Billion up from Kshs 560.4 Billion driven mainly by 21% growth in net loans and 40% growth in cash and cash equivalent. Investments in government securities decelerated to only grow by 5% as more funds were reallocated to lending to the real economy. Shareholders’ funds have grown by 20% to Kshs. 108.7 Billion up from Kshs 90.7 Billion while long-term funding grew by 18% to Kshs 66.3 Billion reflecting a stable diversified mix of funding.

The Group’s net interest income grew by 10% to Kshs 32.29 Billion from Kshs 29.47 Billion. Non funded income grew by 14% to Kshs. 22.54 Billion up from Kshs. 19.83 Billion to lift total income by 11% to Kshs 54.83 Billion up from Kshs. 49.3 Billion. The faster growth in total income above net interest income reflects the success of the strategic pursuit of the Group to grow quality income through non-funded income growth.

Merchant banking business grew by 27% to reach a transaction volume of Kshs 88.4 Billion up from Kshs 69.6 Billion while merchant commission grew by 19% to reach Kshs 1.74 billion up from Kshs 1.46 Billion. The volume of Diaspora remittances grew by 28% to reach Kshs. 101.9 Billion up from Kshs. 79.8 Billion. Forex trading income and commission grew by 20% to Kshs 2.84 Billion up from Kshs. 2.37 Billion with 23% of the traded forex generated by Diaspora remittances.

The Group’s cost to income ratio improved to 51.3% from 51.5% driven by a faster improvement in the cost to income ratio of the main subsidiary Kenya to 45.9% from 47%. The improvement in cost-income ratio is underpinned by efficiency and cost optimization driven by innovation and digitization. Digitization has helped transform banking from a place you go to something you do. 97% of all transactions now happen outside the branch while 93% of all the Group loan transactions are via the mobile channels.

Relentless pursuit of innovations has resulted in the Group delivering products and services substantially on 3rd party variable cost channels and infrastructure as opposed to fixed cost channels. 77% of the Group transactions are now on mobile, 12% on agency network, 3% through merchants and only 4% and 3% happen on ATMs and branches respectively.

The scaling of the business through geographical expansion also continued to register impressive results, with the regional subsidiaries growing their assets by 26% to reach a contribution of 27% of the Group’s asset base. Two of the subsidiaries Rwanda and Uganda registered a return on average equity (RoAE) of 23.9% and 21.2% respectively, covering their cost of capital, whereas DRC continued its impressive growth in RoAE to 17.7% up from 15.9%. This enabled the Group to register a RoAE of 22.9% and a Return on Average Assets (RoAA) of 3.7%.

The 21% growth in the balance sheet driven by customer deposits growth of 19% and the ability to deploy growth in funding to a quality asset portfolio, and a liquidity of 54.2% reflect the strong strategic positioning of the Group and its ability to effectively manage portfolio risk following the removal of interest rate capping in the Kenyan market that hold 75.6% of the loan book.