Equity Group Defies the Odds to Register KES 15.8 Billion Profit After Tax

Under a challenging operating environment, the Equity Group managed to register a growth in profit after tax of 8 percent in 2018’s third quarter to hit 15.8 billion shillings up from 14.6 billion shillings registered in the same period in 2017.

The operating environment in the last nine months was characterized by volatility in the business environment resulting in elevated inflation, continued interest rate capping causing a credit crunch, and a lowered Central Bank Rate which dipped the yield on loans.

Equity group was positioned by a fortified liquid and agile balance sheet. The Group’s liquidity ratio now stands at 55 percent, non-funded income contributes 40 percent, and subsidiaries now contribute 18 percent of earnings. Costs have declined by 4 percent over the past 1 year.

Equity Group has reported differentiated revenue growth of 1 percent to 49.3 billion shillings up from 48.7 billion shillings, despite the impact interest rates cap and the challenging operating environment have had on the banking sector.

Non-funded income held strong to reach 19.8 billion shillings driven mainly by remittance commissions, trade finance, agency and credit card fees, and commissions.

“Equity Group business model has proven that the Group is not dependent only on the loan book income to drive shareholder value,” Equity Group Managing Director and CEO Dr. James Mwangi said.

“We are reaping the benefits of a strong social brand that focuses on enhancing our relationship with the community through a shared prosperity approach to business.  This, coupled with a staff force that is talented, passionate and committed to our shared vision of transforming the lives and livelihoods of our people gave the Group a strong foundation to confront and defy a perfect storm,” he added.

In the year, the Group’s execution of the 3.0 Strategy of digitization through its digital suite of self-service tools known as Eazzy Banking continued to pay off. Third-party channels reported an exponential growth of customer activity, contributing over 97 percent of transaction volume.

Eazzy Banking App grew by 208 percent to 168 million transactions from 55 million YoY and a value of 89 billion shillings from 52 billion shillings YoY. Eazzy Biz, which is a cash management solution for SMEs had a rapid adoption in the market that resulted in a growth of 148 percent YoY with a transaction value of 187.3 billion shillings from 90.9 billion YoY.

The strategy of re-inventing the branches as relationship and wealth creation centers for the SMEs, corporates and high net worth individuals saw transaction value grow to 11.07 billion shillings from 11.06 billion shillings YoY, while transaction volumes declined from 14.4 million shillings to 13.5 million shillings as customers preferred to transact on the self-service channels.

Equitel’s transaction value grew by 20 percent to 425.1 billion shillings up from 353.6 billion despite a slight decline in transaction volumes to 185.4 million from 197.1 million YoY.

The agency network which has now grown to reach over 30,000 agents saw the transaction volume grow by 7 percent to 53.4 million from 49.8 million shillings with value growing by 17 percent to 459.7 billion from 391.3 billion shillings.

Diaspora remittances grew by 282 percent to 57 billion shillings from 15 billion shillings YoY due to an increased strategic partnership with payment partners including PayPal, Equity Direct, Western Union, MoneyGram, Wave, and Swift.

 Income from Treasury Operations increased by 18 percent to 15.7 billion shillings from 13.2 billion YoY driven by an increase in government securities portfolio to 159 billion shillings from 128 billion shillings and increasing its contribution to the total income to 27 percent.

Total assets grew by 8 percent to 560.4 billion shillings up from 518.2 billion shillings YoY with net loans growing by 9 percent to 288.4 billion shillings up from 265.4 billion shillings while government securities grew by 24 percent to 159 billion shillings up from 128 billion YoY.

The focus by the Group on the quality of the loan book saw Non-Performing Loans (NPLs) as at the end of the year close at 8.7 percent compared to 12.7 percent for the banking sector.

Deposits grew by 9 percent to 402.2 billion shillings from 368.8 billion as the number of customers reached 12.7 million.

“While the agile and liquid balance sheet positioned the Group defensively in the past, it now positions the Group competitively to take advantage of emerging opportunities at lower operational costs,” Dr. Mwangi commented.