97% of Equity’s customer transactions now online, via self-service devices and third-party platforms

Equity Group has announced a 98% growth in half year profits to Kshs.17.9 billion up from Kshs.9.1 billion the previous year.

Speaking while releasing the results, Equity Group MD and CEO Dr James Mwangi said: “The defensive and offensive strategy adopted by the Group at the onset of the Covid-19 pandemic to create resilience, agility and recovery has been very effective in positioning, navigating and driving performance.”

(TOP: Equity GroupMD and CEO, Dr. James Mwangi – centre; Group Director Strategy, Strategic Partnerships and Investor Relations, BrentMalahay - left; and Group Head of Financial and Regulatory Reporting, MaryNteere – right; discussthe Group’s 2021 Half Year performanceduring the Group Investor Briefing. EquityGroupannounced a 98% growth in half year profit toKsh17.9B up fromKsh9.1Bthe previous year).

The offensive growth strategy saw deposits register a 51% growth to Kshs.820.3 billion up from Kshs 543.9 billion, while long term borrowed funds grew by 78% to Kshs. 102.3 billion up from Kshs.57.6 billion. Net Loans and advances grew by 29% to Kshs. 504.8 billion up from Kshs. 391.6 billion, while investment in Government securities grew by 46% to Kshs. 315.5 billion up from Kshs. 216.4 billion resulting in 50% growth in Total Assets to Kshs. 1.12 trillion up from Kshs. 746.5 billion.

The aggressive growth strategy effected by the Group resulted into a 33% growth in topline Total Income to Kshs. 51.6 billion up from Kshs. 38.7 billon driven by a 26% growth in Net Interest Income of Kshs. 31.2 billion up from Kshs.24.6 billion and a 45% growth in Non-Funded Income of fees, commission and transactions to Kshs. 20.4 billion up from Kshs. 14.1 billion.

The defensive approach focused on high asset quality, strong capital and liquidity buffers that saw the Group present a strong non-performing loans (NPL) coverage of 92% up from 73% the previous year attributed to a decline in gross non-performing loans by Kshs. 1.3 billion from Kshs.61.2 billion to Kshs. 59.9 billion. Loan loss provision declined by 66% from Kshs. 7.7 billion to Kshs. 2.6 billion to register cost of risk of 1.2% down from 4.2%.

Net non- performing loans declined by Kshs. 5.4 billion from Kshs. 28.3 billion to Kshs. 22.9 billion due to the aggressive provisioning the previous year under the defensive strategy. Of the Kshs. 171 billion Covid-19 restructured loan book, Kshs. 162 billion is categorized as performing with Kshs. 103 billion having resumed repayments, Kshs. 6 billion fully repaid, Kshs. 92 billion up to date in repayment and Kshs. 5 billion non performing. Only Kshs 64 billion remains under Covid-19 moratorium constituting only 11% of the entire loan book. Total operating costs grew by 4% to Kshs. 27.8 billion against a 33% growth in total income to Kshs. 51.6 billion driving profit before tax up to Kshs. 23.8 billion up from Kshs. 12 billion a growth of 99%.

Efficiency gains saw Cost Income Ratio decline marginally to 48.5% from 48.8% driven by a reduction of cost of funds to 2.6% down from 2.9%.  Return on Average Assets (ROAA) grew to 3.3% in spite of the 50% expansion in Total Assets while Return on Average Equity (ROAE) grew to 25% up from 15.4% in spite of 26% growth in Shareholders Funds. Earnings per share grew by 95% to Kshs.4.7 up from Kshs.2.4. Liquidity buffers saw cash and cash equivalent register a growth of 154% to Kshs. 219.5 billion up from Kshs. 86.6 billion with Liquidity Ratios rising to 62.4% up from 54.2% with Loan to Deposit Ratio declining to 61.5 % down from 72.0%. Total capital to risk weighted assets stood at 17.6% while core capital to risk weighted Assets stood at 14.1% as at 30 June positioning the business ready for accelerated growth.

“The strong capital and liquidity ratios have positioned the Group well for continued execution of the offensive strategy particularly in light of improving asset quality and operational efficiency and an improving operating environment,” added Dr. Mwangi.

The 6 countries within which the Group operates have projected 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 fairly stable Micro Economic Environment, making the Group well positioned to continue with its offensive and defensive strategy for resilience, agility, recovery and rapid growth.

The regional approach with Kenya now being only 60% of the Group balance sheet mitigates national shocks and sovereign risks. Group efficiencies shared with the subsidiaries are quickly translating regional growth to value creative growth, with majority of the regional subsidiaries Return on Average Equity being higher than their cost of capital.

Business transformation through innovation and digitization continues to yield an agile and efficient business with value proposition for customers being enhanced by convenience, control and freedom of choice over their money and lifestyle fulfilment. 97% of customer transactions are now online, on self-service devices and third-party platforms. Covid-19 pandemic has acted as a tail wind for customers’ adoption of digital offering fastening the pace of business transformation with significant upside on efficiency as the Group increasingly becomes a technology platform and transform from being a fixed cost business to a variable cost business.

The Group has accepted and adapted to the Covid-19 environment as the new normal. Through digitization, the Group has enabled and continues to support clients to adopt online banking, making banking what they do on devices as opposed to where they go. Banking has become a 24-hour business with fulfillment of lifestyle with digital payments becoming the new battlefield for banking.

“We have witnessed resilience and recovery of businesses with digital banking transactions growing by 57.6% to 606.9 billion up from 385.2 billion transactions during the same period the previous year. The value of the digital transactions increased by 111.3% to Kshs. 2.5 trillion up from Kshs. 1.16 trillion for a corresponding period the previous year,” said the Group in statement.

“The legacy banking whose value of transaction declined by 12% to Kshs.1.1 trillion down from Kshs.1.25 trillion for the previous year to June has registered a growth of 24% to Kshs.1.37 trillion. The acceptance and adaptation to a Covid-19 environment as the new normal saw the Group’s asset base grow by 50% to reach Kshs. 1.12 trillion driven by customers’ deposit growth of 51% and net loans and advances to clients by 29%.”

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