RECORD DIVIDEND PROPOSED AS EQUITY GROUP REGISTERS A PROFIT BEFORE TAX OF   KSHS. 43.7 BILLION

For the second year in a row, Equity Group has proposed a record dividend of Kshs.15.1 billion. While releasing the 2023 full year financial results, Dr. James Mwangi, Group Managing Director and CEO said  :  “The Kshs. 4 per share dividend amounts to a 36% payout of the Kshs.43.7 billion  profit after tax.”  It is equivalent to Kshs 11.1 earnings per share or a   dividend yield of 11.9% on the 2023 year-end closing share price of Kshs.33.65 or 800% on par value.”

The performance reflected strong momentum as net interest income grew by 21% to Kshs.104.2 billion up from Kshs.86 billion, while non-funded income registered an impressive 30% growth to Kshs.75.9 billion up from Kshs 58.3 billion.  The gross trade finance revenue grew by 90% to Kshs.11 billion from Kshs 5.8 billion. This was driven by a 106% growth of trade finance related lending and 26% growth of trade finance guarantees as well as   off-balance sheet items. Total costs grew by 52% to Kshs.128.2 billion up from Kshs 84.5. This was principally driven by a 139% growth in loan loss provision of Kshs 32.8 billion up from Kshs.13.7 billion to strengthen asset quality buffers. Other operating expenses and staff costs grew by 39% and 28% respectively. They were   driven by high inflation and depreciation of the Kenya shilling. Return on average equity stood at 22.3% against an 18% cost of capital. Profit after tax declined by 5% to Kshs. 43.7 billion down from Kshs.  46.1 billion. This  was as a  result of interest expense growing at 53% compared to 30% growth rate of interest income.

Gross balance sheet grew by 26% to Kshs.1.821 trillion up from Kshs 1.447 trillion driven by 29% growth in customer deposits to Kshs 1.358 trillion from Kshs 1.052 trillion. Shareholders’ funds grew by 20% to Kshs.218.1 billion up from Kshs 182.2 billion. Deployment of funding saw net loans grow by 26% to Kshs.887.4 billion up from Kshs.706.6 billion while government securities holding grew by 27% to Kshs.500.5 billion up from Kshs.394 billion as cash and cash equivalent grew by 25% to Kshs.290.1 billion up from Kshs 232.4 billion.

Resilience

The group’s  business has demonstrated resilience after multiple shocks, interest capping, the Covid- 19 global health pandemic, global supply chain disruptions, Russia/Ukraine war and global macro-economic headwinds. This has been  exemplified by  foreign   exchange  volatility, high inflation and high interest rates over the last  seven  consecutive years. During this turbulent period,  the number of customers has grown to 19.6 million up from 10.4 million. Additionally, the  customer deposits have grown to Kshs.1.358 trillion up from Kshs.303.2 billion while the loan book has grown to Kshs.887.4 billion up from Kshs.269.9 billion. In the same vein, the group’s   total assets have grown to Kshs.1.822 trillion up from Kshs.428.1 billion , while  the   shareholders’ funds  stand  at  Kshs.218.1 billion,  up from Kshs. 72.1 billion.

Over the last  seven years,  the group has intensified and strengthened its risk management governance framework and a value-based organizational culture that emphasizes on human interactions and attitudes as well  as   norms and practices that drive an innovative, customer centric approach, strong compliance and a prudent risk management culture. Deep purpose, a consistently strong risk management culture and a vibrant value-based organization culture have supported the evolution and development of the group brand to achieve recognition and accolades such as the Oslo Business for Peace Award and   the  second  strongest global banking brand by Brand Finance. By the same token,  IFC, the private sector arm of the World Bank has recognized Equity as the bank with the highest number of green financing loans for climate mitigation and adaptation worldwide.

The defensive strategy adopted by the group has seen it register strong risk buffers of 53.4% liquidity, relatively strong asset quality with strong non- performing loan  coverage and strong capital buffers. Total capital to risk weighted asset ratio of 18.1% reflects a buffer of 3.6% above minimum capital requirements of 14.5% while core capital to risk weighted asset ratio stood at 14.3%, a buffer of 3.8% above the legal requirement of 10.5%. The group is well capitalized and strategically positioned for its offensive growth strategy.

Financial  eco-systems

Equity’s  strategy is anchored on building sustainable financial eco-systems, evolving with the needs of the customers and the economies it helps  to connect.  From its heritage as a core banking services provider, and a market leader in Kenya with a market focus served on banking infrastructure and technology build out, Equity Group has evolved into a financial services and technology platform and   a richly diversified regional lender. It   continues to scale the value chain and connecting fragmented supply chains and trade routes. The future of Equity spans beyond banking in keeping with customer needs and core values across banking, insurance, technology and sustainability through social and environmental impact.

In positioning to grow with the Eastern Africa of tomorrow, Equity Group has become a regional systemic financial services provider in position one or two in four of the six markets it operates in:  Kenya, DRC, Rwanda, and South Sudan. A truly Eastern Africa regional bank, Equity Group’s deposit distribution is: Kenya 50%, DRC 32%, Uganda 8%, Rwanda 6% with loan distribution: Kenya 51%, DRC 32%, Uganda 8%, Rwanda 6%. Regional banking subsidiaries and other non-banking subsidiaries hold 50% of the assets, 51% of all revenue and 56% of profit before tax,  making Equity Group a truly Eastern Africa regional financial services player.

Diversification

Financial services diversification has seen Equity Group Insurance business being in operation for twenty one  months. The business  has attracted 1,274,980 unique customers. It   closed the year with total assets of Kshs.19.2 billion  and  a  profit before tax of Kshs.934 million. This   gives  a return on average equity of 70.4% and a return on average assets of 5.4%. As at 30^th September 2023,  Equity Life Assurance had captured 2% of life industry market share , ranking  13^th position in the industry and 7% of group life and credit market share at 6^th position in the industry. The Equity Group Insurance business will venture into health and general Insurance in the course of this year.

The technology group enables the business to transform its delivery channels on a technology platform through digitization.  Micro, small and  medium  enterprises (MSMEs)  and retail digital loan repayments are at 98% and 96% respectively on disbursement value of Kshs.284.6 billion and a 6.2 million disbursement count. Digitization is increasingly making the group business online, transforming the model from “where you go to what you do on devices and compressing time and geography whatever time, wherever.”

In line with its purpose, Equity has  made a deliberate and intentional strategic decision to support its customers through the current macro-economic turbulence of high inflation, depreciating domestic currencies, exchange rate volatility and high interest rates. Despite approval by the Central Bank to adopt risk based lending rates, currently at 20% to 24% for consumer and retail lending and treasury bills and bonds, attracting 17% /18%, Equity Group opted to maintain 32% of its consumer loans to salaried civil servants, teachers and private sector employees at 13% interest rate to cushion them and their families during this difficult times. Equity has also maintained all loans disbursed during the interest rate capping period at 13% interest rate. As a result, interest expense for deposits grew by 53% from Kshs 336 billion to Kshs 51.4 billion while interest income on loans grew only by 30%.

The group continues to promote social transformation through its social impact investments championed by Equity Group Foundation, changing lives, giving dignity and expanding opportunities for wealth creation.  “With clarity of the Africa Recovery and Resilience Plan, strong leadership and human capital, strategic positioning in one of the world’s fastest growing regions, a diversified business model across banking, insurance, health, philanthropy, technology and its execution, risk management capabilities, resilience and strong buffers, Equity is uniquely positioned to deliver on a positive and promising focus to all its stakeholders,” Dr Mwangi added.