FOR EQUITY IT IS TOO LATE TO FAIL

Finding solutions and getting creative amidst challenges is no longer just a cliché for the modern corporate. Had Equity Group just been brooding about the interest rate caps, it could be all doom and gloom today. But things are rather rosy at their headquarters in Upper Hill. From turnaround poster kids to come back kings, it is all in a day’s work.

After two years of depressed growth in traditional banking business, Equity Group has bounced back to organic growth registering a year on year 13% growth in loan book. “We have learnt to operate with interest capping as a new norm despite the associated challenge of risk pricing”, said Dr. James Mwangi, Managing Director and CEO, Equity Group Holdings Plc while releasing the first quarter results.

The Group registered a 15% growth in total assets to reach Kshs.605.7 billion driven by growth of 12% on customer deposits. “Intermediation engine has bounced back with growth in deposits intermediated to loans,” said Dr. Mwangi.

Interest income grew by 7% while non funded income registered a 7% growth rate. Profit before tax grew by 6% to Kshs.8.8 billion up from Kshs.8.3 billion the previous year. The 7% growth on interest income was on the strength of 13% growth in the loan book, overcompensating for the reduction in lending rate from 14% to 13%.

Non-funded income contribution to total income bounced back to 41% up from 38% recorded the previous year. Non-funded income growth reflected increased transactional activities and uptake of various fees and commission services, including merchant banking commission which grew by 15% driven by increased market share to 42% of Visa acquiring business up from 38%. Forex trading income grew by 22% supported by increased dollar flow from Diaspora remittances that went up by 27% to reach Kshs.30.9 billion

Bond trading income climbed up 92% to Kshs.450 million while unrealized capital gains on mark to market on government securities improved by 110% to Kshs.1.42 billion up from Kshs. 680 million due to declining yields. Mobile banking income swung north by 15% to Kshs.282 million reflecting the growth in digital business.

The Kenya banking subsidiary bounced back pushing regional subsidiaries contribution to the Group profits to 18% down from 20% in  the previous year despite the regional subsidiaries increasing their total Group asset contribution to 26% up from 25% and increasing their total Group deposits and loan contribution to 25% up from 24%. The improvement in profit contribution by the Kenya subsidiary was driven by improved cost income ratio that declined from 42.5% to 41.8% despite the reduction of lending rates from 14% to 13%.

Digitization has seen 93% of loans disbursed being accessed through the mobile channel while 97% of all cash-based transactions occurred outside the branch with mobile and agency channels taking the lion share. Digitization supported reduction of staff costs in the Kenya subsidiary for the  first   quarter from Kshs.1.7 billion to Kshs.1.6 billion.  The group staff costs were at Kshs.2.6 billion.  Digitization of the customers’ journey has eased their experience leading to growth of digital payment transactions by 94% and supporting their growth to 13.6 million and their deposits by 12% to Kshs.428.5 billion up from Kshs.382.4 billion. This has driven the group balance sheet up by 15% to Kshs.605.7 billion.