By George Marenya
When you hear the tax man missing his targets, the economy is bad. Every time you see few cars on the road even on good days, this indicates that inflation is biting hard. In the midst of all this, Equity Bank is holding its head high while keeping the lights of the economy on.
In its third quarter 2023 results announced on Monday 20, 2023, the loan book grew by 26 percent; a testament of keeping to its ever present goal of changing lives and giving customers dignity. Profit after tax grew by five percent to Kshs. 36.2 billion. It is a good gesture to stand with your friends (customers) during difficult times. In fact, at Equity every customer is considered a member further dignifying him or her.
Group revenue registered a 28 percent growth with Kenya contributing 50 percent after a 13 percent growth. Subsidiaries contributed 50 percent driven by strong revenue growth of 81 percent in Democratic Republic of Congo ( DRC), 33 percent in Uganda, 38 percent in Rwanda and 203 percent for Equity Life Assurance Kenya. Non-funded income registered robust growth of 38 percent to Kshs. 56.5 billion up from Kshs. 41.1 billion, as net interest income grew by 21 percent to Kshs. 72.6 billion up from Kshs. 59.8 billion , allowing non-funded income to contribute 43.8 percent of the total income of Kshs. 129.1 billion up from 40.7 percent the previous year.
What currently ails the economy is an environment of high inflation, rising interest rates and the dollar growing stronger than the Kenyan Shilling. Equity has therefore decided to offer customers the funding flexibility to restructure their businesses and see where new opportunities for making money may exist. It helps that certain economic reforms have created such new found opportunities.
Having emerged strong and resilient from the Covid-19 pandemic, has put Equity on a good footing while applying lessons learnt to further cushion customers from destructive economic shocks. A key move during the pandemic saw the bank give customers loan repayment breaks. It rescheduled 45 percent of its entire loan book.
A few prudent measures have been taken to save the customer from the full impact of the economic turbulence. One important measure has been to absorb the effects of inflation in the bank’s operational costs. Secondly, the rise on interest rate on deposits has not been transferred to borrowers.
Focused pursuit of geographical expansion and diversification continues to deliver impressive results. The group’s deposits grew by 20 percent to Kshs. 1,208.6 billion up from Kshs. 1007.3 billion, with Kenya contributing 51 percent after a growth of 4 percent. Collectively, subsidiaries contributed a 49 percent growth. DRC saw a growth of 28 percent, Uganda 32 percent, 39 percent in Rwanda and 56 percent in Tanzania.
A group-wide broader strategic diversification by geography, business lines, industry/sector, product portfolio, currencies of operations, streams of income and delivery mechanism has yielded risk management benefits and strengthened the group’s resilience by sustaining key buffers of diversified quality income streams, capital base, liquidity and quality of assets as well as efficient and effective operational delivery mechanisms.
Focus on trade finance in support of the Africa Continental Free Trade Agreement (AfCFTA) aspirations, saw gross trade finance income grow by 90 percent. Foreign exchange income grew by 56 percent which was driven by a 24 percent growth in foreign remittances to Kshs. 309.1 billion up from Kshs. 248.7 billion. This delivered essential forex inflows while raising remittance processing income by 19 percent from Kshs. 1.3 billion to Kshs. 1.6 billion.
The group strategically positioned the balance sheet to be agile with a liquidity ratio of 49.7 percent to respond to emerging opportunities as the macroeconomic environment eases and to have a quality balance sheet as uncertainty reduces and business bounces back. Overall, loans grew by 26 percent to Kshs. 845.9 billion up from Kshs. 673.9 billion. Kenya’s contribution to this was 54 percent after a growth of 8 percent.
The leg up from subsidiaries stood at 46 percent of the loan book reflecting a strong 71 percent in DRC, 40 percent in Uganda, 33 percent in Tanzania and 20 percent in Rwanda. The loan book is in both US Dollars and shillings. Dollars take up 47.6 percent of the loan book while 52.4 percent is in local currencies of the countries where Equity is present. All sectors of the economy have benefited from the loans. These include retail, micro, small and medium enterprises (MSMEs), agriculture, corporate and large enterprises as well as the public sector covering all segments of the economy and eco systems.
Most of these loans were transacted via digital channels to a tune of 95 percent of all disbursements and 42 percent in value. Indeed, digital platforms have delivered ease and convenience to customers.
The social engine of the bank keeps running. Through financial education, the bank gives financial education to millions of youth and women. This training builds the capacity of customers hence de-risking their transactions and businesses through efficient planning and operations. Under the Young Africa Works programme, Kshs. 259 billion has been disbursed to a record 269,081 MSMEs.
The group continues to grow its brand, now recognized as the fourth strongest financial brand globally by Brand Finance. It is ranked in the 14th position among Africa’s best performing banks and the best and strongest in Eastern and Central Africa by The Africa Report. In this challenging macro-economic environment, the group has registered a return on average assets of 3.1 percent and a return on average equity of 25.1 percent. It is strategically positioned with strong capital and liquidity buffers to bounce back as the stormy macroeconomic tide eases and as the operating environment improves with the recovery of our economy.