Equity Bank Makes Ksh 40.9 Billion In Profits After Tax For Q3

Against a backdrop of continued macroeconomic headwinds of high interest rates and volatile exchange rates across the markets that the Group operates in, Equity Group Holdings Plc (EGH) continues to demonstrate resilience, with regional businesses contributing 51% of profit before tax and 48% of total assets to reach Kshs.1.7 trillion as of 30th September 2024.

The Group, which has been named the top financial brand in Africa and the 2^nd Strongest Banking Brand in the world by Brand Finance and backed by its motto of ‘’Growing Together in Trust’’, has seen its deposit franchise grow 9% year-on-year to Kshs.1.3 trillion with its customer base now at 21.3 million. This growth in deposits has resulted in a 12% increase in cash and cash equivalents to Kshs.295.5 billion and growth in investment securities to Kshs.468.1 billion resulting in an overall strong liquidity position of 55%.

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While releasing quarter three results, Dr. James Mwangi, Equity Group Holdings Plc Managing Director and Chief Executive Officer said, “We are optimistic that the strong liquidity of the Group has positioned us to effectively support our customers as the economy starts showing signs of improvement in the key markets we operate in, signaled by reduction of the Central Bank Reference rates in some of the countries where we operate. With the improved liquidity, the Group continued to optimize its balance sheet, reducing leverage by Kshs.137.6 billion of expensive long-term borrowings.”

Shareholders’ funds grew by 17% to Kshs.227.0 billion strengthening the Group’s ability to deliver the private sector-led Africa Resilience and Recovery Plan (ARRP) by investing in new subsidiary undertakings in the Insurance Group as well as positioning the Group to continue to take advantage of any market opportunities.

The Group registered robust top-line growth with interest income growing by 13% to Kshs. 125.9 billion from Kshs.111.1 billion during the period under review despite the high inflation and interest shocks which saw returns to customers in the form of interest expense grow 18% to Kshs.45.3 billion from Kshs.38.5 billion. Non-funded income continues to grow steadily, increasing by Kshs.2 billion and yielding a total income growth of 8% to Kshs.138.9 billion, up from Kshs.128.9 billion year-on-year.

The Group’s offensive strategy of regional and product diversification continues to bear fruit with the Kenya banking subsidiary contributing 47% of revenue from 52% in the previous period. As business continues to grow in the Democratic Republic of the Congo (DRC) and with synergies realized from the Cogebanque acquisition in Rwanda, subsidiaries now account for 47% of total loans, up from 46% in 2023, and contribute 47% of profit after tax.

The global operating environment characterized by macroeconomic shocks saw the Group continuing with its conservative and prudent defensive approach by booking adequate loan loss provisions amounting to Kshs 12.7 billion. This has resulted in an NPL coverage ratio of 67% with a Non-Performing Loans (NPL) ratio of 13.4%, way below the latest published industry average of 16.7%. The Group continues to make significant strides in its differentiated managerial strategy and in enhancing its control environment to better position it to navigate the challenging macroeconomic and complex regulatory landscape while driving sustainable growth. The Group’s continued investment in modernizing its technology infrastructure coupled with high inflation has seen its expenses excluding provisions increase by 19%.

The Group recorded a 9-month Profit after Tax of Kshs.40.9 billion representing a 13% year-on-year growth, with earnings per share increasing to Kshs.10.4 up from Kshs.9.2. Regional subsidiaries accounted for 51% of the profit for the period. This performance is complemented by strong capital buffers with a core capital ratio of 15.9% and a total capital ratio of 18.3% versus the regulatory threshold of 10.5% and 14.5%, respectively.

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“We are proud that the Group has a sufficient cushion on its key balance sheet buffers of liquidity, capital, and NPL coverage while at the same time, it continues to report above industry average profitability with return on average equity of 24.5% and return on average assets of 3.1%,’’ added Dr. Mwangi.

Having disrupted and transformed the banking industry, EGH identified insurance as critical to contribute to social economic prosperity by ensuring business and individual resilience and security. The Group was recently granted a general insurance license in addition to the already existing life assurance license. With this, the Group will offer holistic and integrated financial services to corporate, SME, and retail customers by availing insurance solutions for all customer needs for protecting life, health, and wealth through its diverse product offering. Equity Life Assurance (Kenya) being the first underwriting subsidiary of the Group posted 181% year-on-year profit before tax, closing at Kshs. 1.07 billion year-to-date up from Kshs. 381 million for the same period last year. ELAK had a capital adequacy ratio of 141%, indicative of the business’ strong ability to meet its obligations to customers. With return on average assets at 4.6% and return on average equity at 57.8%, ELAK continues to contribute positively towards the Group’s performance.