Equity Group has released 2023 half-year results that demonstrate resiliency in the face of a challenging operating global macro environment marked by persistently sticky high inflation, high-interest rates, volatile exchange rates, and devaluation of emerging economies’ currencies. Due to the recovery of mark-to-market losses on Eurobonds, the Group saw a funding growth of 23%, led by increases of 21% in customer deposits and 29% in shareholders’ funds. Investments in government securities increased by 33% while net loans to clients increased by 26%. Government security investment returns climbed from 10.1% to 11.1%, while loan investment yields increased from 11.4% to 11.9%. Deposit fees increased to 2.9% from 2.3%, increasing funding fees up to 3.7% from 2.8%, and generating
The Group Managing Director and CEO, Dr. James Mwangi, stated that “Our strategic pursuit has resiliently positioned us to weather the macro-economic headwinds and turbulence” when announcing the half-year financial results. As a result of regional geographic development and business diversification, other subsidiaries now contribute 46% of the company’s total assets and 45% of its profit before taxes, with the main drivers being insurance and the DRC business. The effort to increase non-funded income was successful, with total income increasing by 24%, driven by a 42% increase in non-funded income and a 17% increase in net interest income. He continued, “Trade finance-related lending increased by 46% while gross trade finance revenue increased by 117%. Diaspora flows increased by 146% to account for 12% of all client FX volumes, while FX total revenue increased by 68%.
With a defensive approach, the liquidity ratio remained strong at 51.1% while the core capital to risk-weighted assets and total capital to risk-weighted assets ratios were solid at 15.1% and 19%, respectively. Despite the difficult macroeconomic and microeconomic climate, the Group recorded an NPL ratio of 9.8% compared to the 14.9% industry average. According to prudent management, the cost of credit risk increased from 1.3% to 1.9%, driven by an increase of 89% in the provisions made to protect against the danger of rising portfolio at-risk (PAR) ratios. The Group increased its leadership bench by hiring qualified and experienced executives to match capabilities and competencies to the difficulties of expansion in light of the VUCA operating environment. While other operating costs increased by 33%, staff costs increased by 32%.
The world’s fastest-growing region continues to be East Africa. The regional governments are concentrating on budget deficit reductions and fiscal restructuring. In light of Equity Group’s offensive strategy of concentrating on payments, trade finance, and FX business among other non-funded income while strengthening efficiency through digitization and taking a defensive stance about liquidity, capital, and asset quality buffers, the Group continued to meet its stated financial outlook. With a Return on Equity of 27.7% and a Return on Assets of 3.5%, Profit After Tax was Kshs. 26.3 billion. In addition, Dr. Mwangi stated, “We are confident that Equity Group is strategically positioned as a regional systemic bank among the top 3 in 5 of its 6 operating countries to support further integration and increased cross-border trade under the African Continental Free Trade Area while supporting the region to remain the fastest growing common market in the world to offer the opportunity for long term sustained value creation.
