Equity Q1 Profit Up 64 Percent To 8.7 Billion Shillings

Equity Bank’s net profit for the first three months to March rose by 64 percent to 8.7 billion shillings. The lender has attributed the profits to a strong growth in both interest and non-interest income.

The Net interest income increased 28.4 percent y-o-y to 14.8 billion shillings on the back of 31.9 percent y-o-y rise in interest income to 20.3 billion shillings and a 42.4 percent y-o-y increase in interest expense to 5.5 billion shillings.

Non-funded income grew 30.7 percent y-o-y to 10.9 billion shillings on account of 21.5 percent y-o-y increase in fees and commission income to 6.6 billion shillings, 82.7 percent y-o-y rise in forex income to 2.0 BN, and a 26.5 percent y-o-y rise in other operating income to 2.3 billion shillings.

Operating expenses (less loan loss provision) increased 30.5 percent y-o-y to 12.7 billion shillings mainly on the back of a 24.5 percent y-o-y rise in staff costs to 4.0 billion shillings and a 38.3 percent y-o-y rise in other operating expenses to 6.7 billion shillings.

“A liquid balance sheet with Sh500 billion of cash, cash equivalents, and government securities reflect the agility to redeploy funding seamlessly as the economies recover from the adverse impact of the Covid-19 multi-crisis,” said Mr. James Mwangi.

Customer loans and advances grew 28.6 percent y-o-y (+2.1 percent q-o-q) to 487.7 billion shillings whereas investment securities rose 36.4 percent y-o-y (+19.1% q-o-q) to 258.9 billion shillings. On the funding side, customer deposits increased 58.2 percent y-o-y (+6.6% q-o-q) to 789.9 billion shillings.

Gross NPLs increased 42.2 percent y-o-y to 63.5 billion shillings (+6.9 percent q-o-q). Interest in suspense rose 43.6 percent y-o-y to 7.7 billion shillings. As a result total NPLs rose 42.0 percent y-o-y to 55.8 billion shillings, placing the NPL ratio at 11.5 percent. NPL coverage ratio stood at 49.3 percent, up 1,093 bps y-o-y.

Equity Group is now trading at P/E and P/B multiples of 6.9x and 1.2x respectively against an industry median of 6.8x and 0.8x. Its ROE stands at 17.3 percent and its ROA stands at 2.2 percent.

“We have done a simulation of the Sh171 billion and only Sh3 billion has shown signs of stress and has been downgraded to category II as non-performing,” said Brent Malahay, Group Director Strategy