Equity Group Holdings PLC doubles its profitability
August 17, 2021. Equity Group Holdings Plc announced a 98% growth in half-yearly profits to Kshs 17.9 billion, compared to Kshs 9.1 billion the previous year.
Speaking on the release of the results, Equity Group Managing Director and CEO Dr James Mwangi said, “The defensive and offensive strategy adopted by the group at the start of the Covid-19 pandemic to create resilience, agility and recovery was very effective, navigation and driving performance.
The offensive growth strategy saw deposits grow by 51% to Kshs 820.3 billion from Kshs 543.9 billion, while long-term borrowed funds increased by 78% at Kshs. 102.3 billion Kshs. 57.6 billion.
Net loans and advances increased by 29% to Kshs 504.8 billion from Kshs 391.6 billion, while investments in government securities increased by 46% to Kshs 315.5 billion from Kshs 216.4 billion. of Kshs, which resulted in a 50% growth in total assets to Kshs 1.12 trillion from Kshs 746.5 billion.
The aggressive growth strategy implemented by the Group resulted in a 33% growth in total revenue from turnover to Kshs. 51.6 billion Kshs. 38.7 billion thanks to a 26% growth in net interest income of Kshs. 31.2 billion against 24.6 billion Kshs and a 45% growth in unfunded income from fees, commissions and transactions to 20.4 billion Kshs against 14.1 billion Kshs.
The defensive approach focused on the high quality of assets, strong equity and liquidity buffers which enabled the Group to present a strong coverage of non-performing loans (NPL) of 92%, against 73% in previous year attributed to a decrease in loans Kshs 1.3 billion from Kshs 61.2 billion to Kshs 59.9 billion.
The allowance for loan losses decreased by 66%, from Kshs 7.7 billion to Kshs 2.6 billion, to record a cost of risk of 1.2% compared to 4.2%.
Net NPLs decreased by Kshs. 5.4 billion to Kshs. 28.3 billion to Kshs. 22.9 billion due to the aggressive provisioning of the previous year as part of the defensive strategy.
Ksh. 171 billion pounds of restructured loans Covid-19, Kshs. 162 billion are classified as successful with Kshs. 103 billion having resumed repayments, Kshs. 6 billion fully repaid, Kshs. 92 billion to date in reimbursement and Kshs. 5 billion non-performers.
Only Kshs 64 billion remains under the Covid-19 moratorium, which represents only 11% of the entire loan portfolio. Total operating costs increased by 4% to Kshs 27.8 billion from 33% growth of total income to Kshs 51.6 billion, bringing profit before tax to Ksh 23.8 billion from Kshs 12 billion of Kshs, a growth of 99%.
Efficiency gains saw the cost-to-income ratio drop slightly to 48.5% from 48.8%, due to a reduction in the cost of funds to 2.6% from 2.9%.
Return on average assets (ROAA) increased to 3.3% despite the 50% expansion of total assets while return on average equity (ROAE) increased to 25% from 15.4% despite growth of 26% of shareholders’ funds.
Earnings per share increased 95% to Kshs.4.7 from Kshs.2.4. Liquidity buffers saw cash and cash equivalents grow 154% at Kshs. 219.5 billion versus Kshs. 86.6 billion with liquidity ratios rising to 62.4% versus 54.2% with a loan / deposit ratio down to 61.5% from 72.0%.
Total capital on risk-weighted assets stood at 17.6% while core capital on risk-weighted assets stood at 14.1% as of June 30, setting the stage for the activity to accelerated growth.
“The strong capital and liquidity ratios have positioned the Group well for the continued execution of the offensive strategy, in particular in light of the improvement in asset quality and operational efficiency and a improving operating environment, ”added Dr Mwangi.
The 6 countries in which the Group operates have forecast strong GDP growth rates; Kenya 7.6%, Uganda 6.3%, Rwanda 5.7%, South Sudan 5.3%, DRC 3.8% and Tanzania 2.7% (IMF 2021 projections) with a fairly stable micro-economic environment , which places the Group in a good position to pursue its offensive and defensive strategy for resilience, agility, recovery and rapid growth.
The regional approach with Kenya, which now represents only 60% of the Group’s balance sheet, mitigates national shocks and sovereign risks. The Group’s efficiencies shared with the subsidiaries quickly translate regional growth into value-creating growth, the majority of the return on average equity of the regional subsidiaries being greater than their cost of capital.
Business transformation through innovation and digitization continues to produce an agile and efficient business with a value proposition for customers enhanced by convenience, control and freedom of choice over their money and the accomplishment of their lifestyle. 97% of customer transactions are now done online, on self-service devices and third-party platforms.
The Covid-19 pandemic has fostered the adoption by customers of the digital offer, accelerating the pace of the company’s transformation with a significant advantage in terms of efficiency, as the Group increasingly becomes a technology platform and goes from a fixed-cost business to a variable-cost business.
The Group has accepted and adapted the Covid-19 environment as the new standard. Through digitization, we have enabled and continue to help our customers embrace online banking, making banking what they do on devices rather than where they go.
Banking has become a 24 hour business with the fulfillment of a lifestyle, with digital payments becoming the new battleground for banking.
We have seen business resilience and recovery with digital banking transactions growing 57.6% to 606.9 billion, up from 385.2 billion in the same period a year earlier.
The value of digital transactions increased by 111.3% to Kshs 2.5 trillion, compared to Kshs 1.16 trillion for a corresponding period in the previous year.
The old bank, whose transaction value fell 12% to Kshs 1.1 trillion, from Kshs 1.25 trillion the year before through June, grew 24% to 1, Kshs 37 trillion.
Acceptance and adaptation to a Covid-19 environment as a new standard saw the group’s asset base grow by 50% to Kshs 1.12 trillion, driven by growth in customer deposits from 51% and net loans and advances to customers by 29%.
The strong capital and liquidity cushions position the Group strategically for good performance going forward.
The Group has stepped up its model of shared prosperity, launching a vast Covid-19 program to protect frontline health workers in 56 county and national referral hospitals and 60 faith-based hospitals thanks to an elaborate initiative to provide equipment personal protection (PPE).
This support continues for a period of 3 years for county and national referral hospitals and will continue for a period of 18 months for faith-based hospitals that are designated as Covid-19 management facilities.
This is in collaboration and in partnership with the Kenya Covid-19 Fund Board. The Group has extended its Equity Afia health franchise to 38 physicians and 45 health clinics and hopes to register 600,000 patient visits by the end of the year.
Over the past two years, the Group has extended the Wings to Fly scholarship program (funded by
Mastercard Foundation, Equity Bank, KfW and other partners) with 18,000 Elimu scholarships from the Government of Kenya with support from the World Bank, bringing the number of high school scholarships to 37,000.
The equity leadership program has so far benefited 17,000 academics, with 893 recipients of global scholarships and the remainder attending public universities and TVET in Kenya.
The Group stepped up the Energy and Environment Program by financing one million clean energy devices, proposing to transform 30,000 schools using wood energy to cook in their kitchens with LPG and planting 35 million trees.
The Group continues to provide support to the government, UN agencies and the donor community to reach 3.3 million households with cash payments under the social safety net program.
The Group has stepped up its efforts to transform farmers into agro-industries and strengthen the financial and entrepreneurial capacity of more than 3 million businesses.
The Group is optimistic about the company’s future prospects as it continues to deliver the convenience of the business engine transformation strategy hand-in-hand with enhanced trust capital brought by the shared prosperity programs of the Equity Group Foundation, the social engine of the Group. .
The improved operating environment continues to enhance the strategic positioning of strong capital and liquidity cushions and an agile balance sheet.