Kenya: Equity posts 36% rise in half year profit supported by growth of loans

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  • Equity Group has reported a 36% growth in its after-tax profit to hit KSh 24.4 billion, principally driven by the growth of loans to customers
  • The Kenyan-based regional lender also attributed the performance to its recovery and resilience strategy
  • Equity Group CEO James Mwangi said the loan growth was targeted to supporting their clients to recover and rebuild after the Covid-19 business disruptions

Equity Group has reported a 36 per cent growth in its after-tax profit to hit KSh 24.4 billion.

The performance was principally driven by a 29 per cent growth in interest income to KSh 55 billion, up from KSh 42.8 billion as a result of the growth of loans to customers by 29 per cent to KSh 650.6 billion, up from KSh 504.8 billion.

The Kenyan-based regional lender also attributed the performance to its recovery and resilience strategy.

Equity Group CEO James Mwangi said the loan growth was targeted to supporting their clients to recover and rebuild after the Covid-19 business disruptions while allowing re-purposing and retooling for resilience and agility to take advantage of emerging opportunities and green shoots in the real economy.

The bank noted that the differentiated strategy adopted by management to support borrowers to cope with the difficulties of Covid-19 business disruptions has seen most of the businesses survive and recover.

Out of KSh 171.4 billion Covid-19 restructured loan book, KSh 46.6 billion has been fully repaid, and a further KSh 114.0 has resumed repayment, with only KSh 8.1 billion nonperforming.

Out of the remaining KSh 11 billion, which is anticipated to resume repayment within the next six months, only KSh 2.7 billion is showing the strain of recovery.

During the period under review, the Group’s culture of customer centricity and focus informed the management’s Covid-19-environment strategy of focusing on customers’ recovery and resilience.

Targeted lending reflected by the 29 per cent growth of the loan book is part of the strategy to sustain recovery, and growth, allow the real economy to thrive and brighten the lights of the economy in generating growth
opportunities.

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The management of the bank has also fully provided for the entire KSh 8.1 billion Covid-19 book that has resumed repayment and is non-performing while proactively downgrading KSh 2.7 billion of the remaining restructured book.

Equity said the success of the recovery and resilience strategy is reflected by the decline in NPL ratios to 8.5 per cent compared to 10.7 per cent the previous year.

The Group’s 8.5 per cent NPL positively and favourably compares to Kenya’s banking industry NPL ratio of 14.7 per cent as of 30th June 2022.

The Group’s NPL coverage stands at 94 per cent. NPL coverage inclusive of credit risk guarantees stands at 119.8 per cent, and the cost of risk has normalised to pre-Covid rates of below 1.5 per cent.

The Group said it continues to hedge against default through a loan book diversification strategy across market segments, with large enterprises holding 26 per cent, SMEs 43 per cent, consumer 20per cent, agriculture 8 per cent, and micro enterprises 3 per cent of the loan book.

Equity Group Photo: File

Group loan book diversification currently reflects 45.9 per cent in US dollars and 54.1 per cent in local currencies.

Geographical sovereign risk diversification has Kenya holding 65%, DRC 19.6%, Uganda 7.3%, Rwanda 4.4%, Tanzania 3.6% and South Sudan 0.1%.

“Equity Group had adopted a strategy of business transformation through digitisation to offer customers a more
online business experience offering ease and convenience. Digitisation compresses time and geography, transforming Equity banking experience from where you go, to what you do on your own devices, whatever time, wherever you are, a truly 24 hours banking experience,” Mwangi said.

Between June 2019 and June 2022, digital banking transactions through mobile and internet channels, Agency and Merchant infrastructure doubled from 330 million to 663.9 million.

Transactions on the Group’s own infrastructure of branches and ATMs declined from 25.3 million to 19.2 million transactions delivering an online self-service business model with 99% of banking transactions being outside the branch and a corresponding 74% of the value of transactions, leaving branches to do high-value transactions.

During the same period, the value of digital transactions has grown over 400% to Kshs 4.4 trillion up from Kshs 1.2trillion while the value of branch and ATMs based transactions have grown to Kshs 1.7trillion up from Kshs 1.1 trillion.

The Group has witnessed take-off of its business-to-business, digital, and consumer-to-business payments through corporate internet cash and liquidity management EazzyBiz and retail payment solutions.

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Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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