Equity Group Holdings has recorded a 25% growth in profit to a record Ksh16 billion after tax for first quarter of 2024.
In a statement dated May 13, the Bank said the profit after tax grew after the Group reported a 5% decline for the year ended 31st December 2023.
While releasing the results Dr James Mwangi, Equity Group Managing Director and CEO said the tax before tax also grew during the same period.
“We have been able to turn the tide from declining profit before tax 13% in December we are now at 21% and profit after from a decline of 5% we are up to 25% being able to give a reasonable return on assets,” Dr Mwangi said.
“Ksh16 billion for a quarter profit after tax is the highest profit we have ever registered in a quarter. So, it is a record quarter profit.”
The Bank explained that its differentiated strong leadership decision making, and an agile balance sheet drove the swift recovery.
Deposits placements grew to 11% compared to 29% registered for the year ended 31st December 2023, as the Group skipped expensive deposits.
Additionally, growth in long-term borrowed funds saw a decline of 21% year on year for the period ended 31st March 2024 as the Group paid out maturing repriced expensive dollar denominated loans.
Loans
Given the elevated credit risk characterized by high non-performing loans environment (NPL), the Group enhanced credit risk underwriting resulting to a 3% year on year growth in loan book as at 31st March 2024 compared to a 26% growth rate for the year ended 31st December 2023.
This also led to re-allocation of lending from private sector credit to public sector lending through government securities, which grew to 21%.
Consequently, the cost of credit risk dropped to 2.9% for the first quarter of 2024 compared to 4.4% for the last quarter of 2023.
The loan to deposit ratio stood at 63% as of 31st March 2024 compared to 65.3% as at 31st December 2023.
There was slow customer deposits growth and decline in long-term loans yielding a lower year on year growth of interest expense for the reporting period to 31st March 2024 to 41% compared to 53% for the year ended 31st December 2023.
Interest income grew to 33%, growth of net interest income accelerated to 28% and provisions grew to 84% during the same period.
“NPL coverage as at 31st March 2024 reporting improved to 68.5% compared to 67.3% reported on 31st December 2023,” read the statement in part.
Besides, the Bank’s growth in total costs declined from 52% in December 2023 to a growth of 28% for the period to 31st March 2024.
This decline in total costs effectively improved cost to income to 47.1% down from 52.3% recorded in the last quarter of 2023.
Digitization & Technology
In addition, digitization and automation of processes has significantly enhanced convenience and ease to customers in self-serving using own devices and 3rd party infrastructure which has shifted the cost structure of the Group from fixed cost to variable costs.
“The recovery momentum is strong after accepting and adapting to the new normal of operating in an environment characterized by Volatility, Uncertainty, Complexity and Ambiguity – VUCA. An environment defined by high inflation, interest rates and volatile currency exchange rates,” the CEO said.
The balance sheet growth slowed down to 10% compared to 26% registered for the year ending 31st December 2023.
However, loan uptake year on year grew at 3% in 2024 compared to a growth of 26% for the period to 31st December 2023.
“Customer deposits growth matched the decline on balance sheet growth to record 11% compared to 29% growth to 31st December 2023,” Equity Group said.
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The Group’s mark to market losses have reduced to Ksh48.4 billion from a high of Ksh78 billion in 3rd quarter of 2023.
“Group liquidity stood at 52.1% with a balance sheet of Kshs.1.69 trillion nearly split equally between a loan book of Ksh779 billion and liquid assets of Ksh752 billion split between cash and cash equivalent of Ksh279 billion and investment in government securities of Ksh473 billion,” read the statement.
Equity Group has built a diversified loan portfolio of Ksh779 billion out of the total funding of Ksh1.69 trillion.
It has spread 40% among corporates and large enterprises, 26% among micro, small and medium enterprises, 28% retail and consumer and 6% among public service institutions in all sectors and segments of the real economy helping diversify credit risk concentration.
Group NPLs have peaked at an elevated level of 13.2% but compare favorably with industry NPL ratio of 15.5% and coverage of 68.5%.
Equity Group Operations Outside Kenya
Further, Equity has successfully transformed from a Kenyan banking leader to a regional systemic financial services leader.
It boasts of being in the top five position in 5 out of 6 countries it operates in, with operations in 3 of the countries being the top 2 market leaders.
The regional banking subsidiaries contributed 63% of the Kshs.20.4 billion profit before tax with a return on average equity of 27.6%, cementing the Groups position as the regional banking leader.
“We see Equity continuing to position itself very strongly in the marketplace. Being the second strongest banking company but I am more excited that Equity is the most valuable banking brand in the region,” Mwangi said.
As a result of business and product diversification, non-funded income contributed 43.9% of the total income of Ksh49.6 billion at Ksh21.8 billion while Treasury contributed 30% of all gross income of Ksh64.8 billion at Ksh19.6 billion.
Trade Finance revenue grew at 22% to Ksh3.1 billion whilst off balance sheet Trade Finance facilitation grew by 23% to Ksh205.6 billion.
New Life Insurance
The new life insurance profit after tax grew by 106% to Ksh321 million while total insurance assets grew by 288% to close at Ksh20.8 billion.
The return on average Equity also grew 25% to 54% up from 43% whilst posting a positive Insurance Service Result indicative of strong underwriting practices.
This confirms that there is a significant opportunity in insurance by providing relevant, innovative and technology driven solutions to the underserved.
In its second year of operations, the life insurance subsidiary has risen to the 4th position in the industry in Gross Written Premiums with 9% market share and number 2 position in Group Credit Business with an 18% market share.
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Equity’s insurance is also position 4 on profitability and position 7 in size in terms of total asset and provided the highest in Return on Equity as of 31st December 2023.
“2024 signaled a strong start with growth of Insurance total assets by 288% to Ksh20.8 billion up from Ksh5.4 billion while net insurance and investment revenue grew 91% to Ksh342 million up from Ksh179 million,” the statement in other part.
Equity has a large distribution and logistics infrastructure of a regional and diversified business spanning over 6 countries of 400 branches.
The Bank’s 1.1 million Pay with Equity merchants over 100,000 agents, 30,000 POS merchants and over 700 ATMs helped the insurance business to reach 5.5 million unique customers within a period of two years.
Equity Group has embarked on a unique opportunity of matching commercial and operational capabilities to match the global brand through systems and processes re-engineering, product house and people competencies that deliver on customer value proposition that match the global brand within the robust governance and strategic plan.
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