Equity Group Holdings Plc posted a growth of 11% in assets to reach Kshs. 518.2 billion as at 30th September 2017 up from Kshs.468.0 billion at the same period last year. The growth was mainly driven by customer deposits which rose to Kshs 368.8 billion from Kshs. 331.4 billion.
The group maintained resilient performance in a very challenging economic environment occasioned by protracted presidential elections which have caused political uncertainty and adversely affected all sectors of the economy. Other adverse factors include prolonged drought which has led to a sharp increase in the prices of food, as well as reduced private sector growth arising from interest rate capping.
The banking sector in Kenya has also been experiencing turbulence reflected in low asset quality, liquidity and solvency challenges, and contracting cash circulation.In order to mitigate against the prevailing economic uncertainties and shocks of the temporary headwinds in Kenya, the group enhanced its liquid assets in Kenya to achieve a liquidity ratio of 54.8% up from 45% in a similar period last year.
The group continued its pursuit of a robust and adaptive strategy. Non-funded income grew by 28% from Kshs 16.6 billion to Kshs 21.3 billion offsetting the effects of reduced interest income. Total income for the period was Kshs 48.7 billion – at par with Kshs 48.9 billion for the same period last year. Its focus on quality and efficiency saw investment in non-risk assets grow by 37% from Kshs 93.1 billion to Kshs. 127.7 billion with improved yields of 11.4% up from 10% last year.The loan book declined marginally by 2% from Kshs 271.4 billion to Kshs 265.4 billion.
Despite interest income on loans and advances in Kenya declining by 36% from Kshs. 28.5 billion to Kshs. 18.3 billion, a growth of 113% in interest income from government securities in Kenya and a growing high yielding loan book in the regional subsidiaries offset the combined effects of capping of interest rates, contraction of interest yields and a reduction in the loan book in Kenya to limit the decline in interest income at 11% from Kshs 39.8 billion over the same period last year to Kshs. 35.4 billion.
Addressing the investors, Dr. Mwangi said the group’s regional expansion continues to pay off. “The subsidiaries in Uganda, Rwanda, South Sudan, Tanzania and DR Congo collectively increased their profit by 53% year on year and enhanced their contribution to the group from 7% to 10% , while increasing their proportion of loans and deposits in the group from 20% to 23%,” he observed.
Liquid assets in cash, cash equivalent and government securities grew by 33% to reach Kshs 202.5 billion up from Kshs 151.8 billion strategically positioning the bank to take advantage of opportunities that would come with the dissipation of the prevailing headwinds.
Focus on asset quality helped the group attain a non-performing portfolio ratio of 7.4% against an industry average of 10.7% as at August 2017 with a reduced cost of risk of 1.41% down from 1.63%.
The group’s innovation and digitization strategy led to 91% of all transactions moving from the fixed cost delivery channels to variable cost delivery channels. Of the total 341.3 million monetary transactions, only 30.3 million transactions passed through the branches and automated teller machines (ATMs) with the rest (311 million transactions) passing through third-party channels. This shift in delivery channels resulted in a reduction of 11% in staff costs while registering a modest increase of 2% in total costs, hence maintaining a cost income ratio of 51.6% at the group despite the 15% reduction in net interest income.
Digitization of diaspora banking platform saw an increase in remittances by 54% from Kshs. 9.6 billion to Kshs 14.8 billion for the period under review Equitel ( a mobile innovation) helped the group capture 25.6% of the value of national money transfer in Kenya and 33% of the national market share of mobile commerce.
The group’s cost of funds reduced from 2.8% to 2.6% year on year mitigating the negative impact of interest capping that saw yields on interest earning assets decline from 14.2% to 11.2% and a lower net interest margin of 8.6% from 11.4%.
The group’s profit before tax of Kshs 20.7 billion and profit after tax of Kshs. 14.6 billion for the period were marginally below last year’s results. Return on equity on the other hand stood at 22.6% while return on assets was 3.9%.
“Overall, the group outperformed the market and has maintained its performance outlook for the year 2017 save for growth in deposits as a result of the unexpected slowdown in the economy occasioned by temporary macroeconomic headwinds,” Dr. Mwangi avered.
The group’s strategy, resilience and agility have been validated globally and locally. Moody’s has rated Equity Bank Kenya with a global rating of B1 and a stable outlook, same rating as Kenya Government, and a national rating of Aa1 – the highest in the country. Moody’s citation for the rating included strong brand recognition, solid liquidity buffers and resilient funding profile, established domestic franchise and extensive adoption of digital and alternative distribution channels.
Global Credit Rating (GCR) rated Equity Group on long term national rating scale of AA and a short term national scale of A1 with a stable outlook. The ratings reflect the group’s strong competitive position in Kenya’s banking industry, which is underpinned by a favourable market reputation as well as a resilient and innovative financial services business spread across East Africa and DR Congo.
The rating is also as a result of robust internal capital generation and profitability which remained resilient in 2016 despite challenging operating conditions.
The Banker’s 2017 Top 1000 World Banks ranked Equity Bank at position 11 on return on assets; position 37 on soundness (capital assets ratio) and position 45 on profits on capital.
Geopoll survey ranked Equity Bank as the most preferred lender in Kenya with the highest scale in Africa followed by Capitec of South Africa and GT Bank of Nigeria.
The bank continues to fortify its brand strength through its social impact investments. 14,168 academically gifted but financially challenged pupils across Kenya have received comprehensive secondary school education and leadership scholarships in partnership with The MasterCard Foundation and other partners. 5,060 university students on the other hand have gone through the Equity Leaders Programme with 403 of them benefiting from airlift to global leading universities. 1,455,759 women and youth have received a free 13-week financial literacy training while 37,402 medium entrepreneurs have gone through a three-year coaching and mentorship programme. Moreover, 600 peasant farmers have been transformed to agribusiness entrepreneurs through training and another 2000 medium sized farmers supported through training, capacity building and market linkages. In partnership with governments and development partners in Kenya, Rwanda and South Sudan, Equity Bank is a disbursing agent for social payments targeting refugees, social protection, agriculture input subsidies, education and water among others. So far, the bank has disbursed Kshs 41.7 billion through that initiative.