Equity Group Bounces Back in Growth With 13% Increase in Loan Book

After two years of depressed growth in the traditional banking business, Equity Group has bounced back to organic growth registering a year on year 13 percent growth in the loan book.

“We have learned 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 1st quarter results.

The Group registered a 15 percent growth in total assets to reach 605.7 billion shillings driven by the growth of 12 percent on customer deposits.

Interest income grew by 7 percent while non-funded income registered a 7 percent growth rate.

Profit before tax grew by 6 percent to 8.8 billion shillings up from 8.3 billion shillings the previous year.

READ ALSO: Equity and Safaricom Partner to Revolutionize Critical Service Access Through Technology and Finance

The 7 percent growth on interest income was on the strength of 13 percent growth in the loan book, overcompensating the reduction in the lending rate from 14 percent to 13 percent.

Non-funded income contribution to total income bounced back to 41 percent up from 38 percent recorded the previous year owing to increased transactional activities and uptake of various fees and commission services.

Merchant banking commission grew by 15 percent driven by increased market share to 42 percent of visa acquiring business up from 38 percent.

Forex trading income grew by 22 percent supported by increased dollar flow from Diaspora remittances that grew by 27 percent to reach 30.9 billion shillings.

Bond trading income grew by 92 percent to 450 million shillings while unrealized capital gains on mark to market on government securities grew by 110 percent to 1.42 billion up from 680 shillings million due to declining yields.

Mobile banking income grew by 15 percent to Kshs.282 million reflecting the growth in digital business.

SEE ALSO: Equity Bank Registers Ksh.19.8 Billion Profit After Tax

The Kenya banking subsidiary bounced back pushing regional subsidiaries contribution to the Group profits to 18 percent down from 20 percent contribution the previous year.

This is despite the regional subsidiaries increasing their total Group asset contribution to 26 percent up from 25 percent and increasing their total Group deposits and loan contribution to 25 percent up from 24 percent.

Digitization has seen 93 percent of loans disbursed being accessed through the mobile channel while 97 percent of all cash-based transactions happened outside the branch with mobile and agency channels taking the lion share.

Digitization supported the reduction of staff costs in the Kenya subsidiary for the 1st quarter from 1.7 billion to 1.6 billion shillings while holding the group staff costs at 2.6 billion shillings.

Digitization of customer journey has eased customer experience leading to the growth of digital payment transactions by 94 percent and supporting growth of customers to 13.6 million and customer deposit growth of 12 percent to 428.5 billion up from 382.4 billion shillings, driving the group balance sheet up by 15 percent to 605.7 billion shillings.

The Group recorded an NPL ratio of 9 percent against Kenya banking sector NPLs ratio of 13 percent with a Group NPL coverage of 78.7 percent.

SEE ALSO: Equity Bank’s Differentiated Operational Model among other businesses

During the quarter under review, the Group asset quality deteriorated marginally from 7.6 percent to 9 percent driven primarily by Tanzania subsidiary that experienced shock.

The market has positively responded to the strategy with Equity Group holdings registering a market capitalization of 157 billion shillings as at 31st March, 22 billion higher than the next largest bank in market capitalization in the Nairobi Stock Exchange.

In pursuit of its ambition of shared prosperity, social and impact investments, the Group’s spend through its corporate foundation has topped to 35 billion shillings with 87 percent of the funding being on the popular and highly impactful Wings to Fly program and Equity Leadership Program.

The program has seen 16,168 needy kids access free secondary education of whom 12,256 scholars have transitioned to university education with 496 students attending leading global institutions.

Similarly, 20 percent of Kenyan youth and women have also benefitted from free 13 weeks’ financial education, FIKA-Financial Education for Africa.