Equity group has posted 64 percent growth profit after tax in its 1st quarter results amid challenging environment of multi-faceted Covid-19 crisis and economic disruption.
The group has also registered a 54 percent growth in total assets and 58 percent growth in customer deposits giving hope of resilience and recovery.
Interest income grew by 32 percent while non-funded income grew by 30 percent to contribute 42 percent of total income. Regional subsidiaries registered resilience and robust growth to contribute 40 percent of total deposits and total assets and 23% of profit before tax with Rwanda and Uganda delivering above cost of capital returns.
During the multi-crisis year, Equity focused on social impact investment in health investing Kshs.1.7 billion in social response to society, forgoing Kshs.1.5 billion in waived mobile transaction fees.
The bank waived Kshs.1.2 billion in loan rescheduling fees and accommodated Kshs.171 billon (or 31%) of the loan book for up to 3 years of principal and interest repayment breaks to enable businesses to survive.
“We kept the lights of the economies we operate in on, supported businesses to repurpose, retool and recover by supporting livelihoods of our customers during the crisis,” said Dr. James Mwangi, Equity Group CEO while releasing the first quarter of 2021 financial results.
“Our strategy; purpose-first, inclusivity, affordability, reach, agility and quality have proven resilient and sustainable,” said Dr.Mwangi.
The CEO said the banks strategy of purpose-first, inclusivity, affordability, reach, agility and quality have proven resilient and sustainable.
Dr Mwangi said the bank adopted a two-pronged strategy of being offensive and defensive.
” We strengthened our capital buffers by retaining profits and withholding dividend payouts, took long-term loan facilities that strengthened our liquidity buffers, supported host communities and our clients to mitigate the impact of the crisis on them by waiving fees and rescheduling their loans to match loan repayments to new cashflow patterns.”
Dr Mwangi noted that, internally, the bank focused on risk mitigation and management in a challenging environment, enhanced NPL coverage through provisions and sought collaboration with development financial institutions on credit and risk sharing guarantees.
“We evolved our organization structure through strong governance focus on risk management, diversity of skills and competencies to enhance our succession planning and mitigation of key person risks,” said Dr. Mwangi.
Operationally, the Group focused on generating and growing non-funded income, treasury efficiency, geographical expansion and business diversification, business transformation through innovation and digitization, balance sheet optimization and agility, asset quality and risk mitigation while pursuing efficiencies and brand development through social impact investment underscoring the performance of the Group.
“Evolving economic, social, political governance reforms and environment have strengthened prospects for long-term sustained regional growth and investment, This coupled with development of physical and soft infrastructure enhance opportunities for private sector credit growth and productivity gains from cross border trade,” said Dr. Mwangi.
The Group registered a balance sheet expansion of 54 percent to reach Kshs.1.07 trillion driven by a 58 percent growth in customer deposits underpinned by Kshs.140 billion shareholders’ funds.
A liquid balance sheet with Kshs.500 billion of cash, cash equivalents and government securities reflect the agility to redeploy funding seamlessly as the economies recover from the adverse impact of the Covid-19 multi-crisis.
The Group took advantage of consumers’ lifestyle changes that acted as a tailwind to human adoption of technology resulting into change in consumer lives and behavior.
Dr Mwangi said the bank changed its strategy to adopt to the changing environment and executed a rapid business transformation that saw 98 percent of all transactions being digital in count, and 65 percent of volume by value.
“Over the last one year, we have witnessed firsthand as our customers adopted our mobile and internet technology channels on self-service devices making our financial services offering truly a 24-hour service and lifestyle,” said Dr. Mwangi.
Dr Mwangi noted that the business seized the moment and fast-tracked transformation by investing and deploying fintech capabilities of biodata, artificial intelligence, machine learning, analytics and algorithms to support customer personalized product and services, offering wide lifestyle capabilities and global reach and presence.
Strong focus on asset quality saw the Group develop an investment portfolio mix that resulted in a market and sectoral diversification across currencies and different geographies.
The Group reported a non-performing loan book of 11.3 percent compared to the industry average of 14.6 percent
Of the 31 percent of the loan book, or Kshs.171 billion Covid-19 accommodated or rescheduled loan book, Kshs.59 billion has resumed repayment with Kshs. 5 billion fully repaid and Kshs.3 billion behind schedule in repayment. Kshs.66 billion is expected to resume repayment within 6 months by 30th September 2021.
On efficiency and cost optimization, the regional subsidiaries continue to gain momentum with marked improvement in cost to asset ratio and cost to income ratio and significant balance sheet and revenue growth.