Equity Group half-year profit grows by 36%

Equity Group has released it's half-year financial results reporting a 36% increase in profit.

The half-year results continue to reflect a sustained digital transformation with 99% of all customer transactions now happening outside the branch network.

While releasing the results, Equity Group managing director, Dr James Mwangi noted that Covid-19 acted as a tailwind to their efforts of degitising Equity's business.

“The business transformation has supported recovery and built resilience in the business. Going online and virtual through digitisation has brought ease and convenience to our customers resulting in increased uptake of our products and growth of the business," Mwangi said.

According to the results, Equity Group’s recovery and resilience strategy saw the group’s profit after tax grow by 36% to Kshs 24.4 billion (Shs780 billion) up from Kshs 17.9 billion (Shs554 billion) for the comparative half year results of the previous year.

The profit growth is attributed to a 29% growth in interest income to Kshs 55 billion up from Kshs 42.8 billion as a result of growth of loans to customers by 29% to Kshs 650.6 billion up from Kshs 504.8 billion.

“The loan growth was targeted to supporting our clients to recover and rebuild after the Covid-19 business disruptions while allowing re-purposing and retooling for resilience and agility to take advantage of emerging opportunities and green shoots in the real economy, “said Mwangi.

Mwangi explained that the differentiated strategy adopted by management to support borrowers to cope with the difficulties of Covid-19 business disruptions has seen most of the businesses survive and recover.

Results show that out of Kshs 171.4 billion Covid-19 restructured loan book, Kshs 46.6 billion has been fully repaid, and a further Kshs 114.0 has resumed repayment, with only Kshs 8.1 billion non-performing.

Out of the remaining Kshs 11 billion which is anticipated to resume repayment within the next six months, only Kshs 2.7 billion is showing strain of recovery.

"Targeted lending reflected by the 29% growth of the loan book is part of the strategy to sustain recovery, growth and allow the real economy to thrive and brighten the lights of the economy in generating growth opportunities," the group CEO said.

Furthermore, in pursuit of resilience and prudence, Equity management has fully provided for the entire Kshs 8.1 billion Covid-19 book that has resumed repayment and is non-performing while proactively downgrading Kshs 2.7 billion of the remaining restructured book.

The success of the recovery and resilience strategy is reflected by the decline in NPL ratios to 8.5% compared to 10.7% the previous year.

The Group’s NPL coverage stands at 94%. NPL coverage inclusive of credit risk guarantees stands at 119.8% and cost of risk has normalised to pre-Covid rates of below 1.5%.

On the other hand, the group continues to prudently hedge against default through a loan book diversification strategy across market segments, with large enterprises holding 26%, SMEs 43%, consumer 20%, agriculture 8%, and micro enterprises 3% of the loan book.

Group loan book diversification currently reflects 45.9% in US dollars and 54.1% in local currencies.

Geographical sovereign risk diversification has Kenya holding 65%, DRC 19.6%, Uganda 7.3%, Rwanda 4.4%, Tanzania 3.6% and South Sudan 0.1%.

Mwangi highlighted that over the last three years during the Covid-19 pandemic, Equity Group has gone through its greatest business transformation in line with the environmental challenges.

“Equity Group had adopted a strategy of business transformation through digitisation to offer customers a more online business experience offering ease and convenience," Mwangi said.

"Digitisation compresses time and geography, transforming Equity banking experience from where you go, to what you do on your own devices, whatever time, wherever you are, a truly 24 hours banking experience," he added.