Against a backdrop of continued macroeconomic headwinds, including high interest rates and volatile exchange rates across the markets that the Group operates in, Equity Group Holdings Plc (EGH) continues to demonstrate resilience. Regional businesses contributed 51% of profit before tax and 48% of total assets to reach Kshs.1.7 trillion as of 30 September 2024.
The Group, which has been named the top financial brand in Africa and the 2nd Strongest Banking Brand in the world by Brand Finance and backed by its motto of ‘’Growing Together in Trust’’, has seen its deposit franchise grow 9% year-on-year to Kshs.1.3 trillion with its customer base now at 21.3 million. This growth in deposits has resulted in a 12% increase in cash and cash equivalents to Kshs.295.5 billion and growth in investment securities to Kshs.468.1 billion resulting in an overall strong liquidity position of 55%.
While releasing quarter three results, Dr James Mwangi, Equity Group Holdings Plc Managing Director and Chief Executive Officer said, “We are optimistic that the strong liquidity of the Group has positioned us to effectively support our customers as the economy starts showing signs of improvement in the key markets we operate in, signalled by reduction of the Central Bank Reference rates in some of the countries where we operate. With the improved liquidity, the Group continued to optimize its balance sheet, reducing leverage by Kshs.137.6 billion of expensive long-term borrowings.”
Shareholders’ funds grew by 17% to Kshs.227.0 billion strengthening the Group’s ability to deliver the private sector-led Africa Resilience and Recovery Plan (ARRP) by investing in new subsidiary undertakings in the Insurance Group as well as positioning the Group to continue to take advantage of any market opportunities.
The Group registered robust top-line growth with interest income growing by 13% to Kshs. 125.9 billion from Kshs.111.1 billion during the period under review despite the high inflation and interest shocks which saw returns to customers in the form of interest expense grow 18% to Kshs.45.3 billion from Kshs.38.5 billion. Non-funded income continues to grow steadily, increasing by Kshs.2 billion and yielding a total income growth of 8% to Kshs.138.9 billion, up from Kshs.128.9 billion year-on-year.
The Group’s offensive strategy of regional and product diversification continues to bear fruit with the Kenya banking subsidiary contributing 47% of revenue from 52% in the previous period. As business continues to grow in the Democratic Republic of the Congo (DRC) and with synergies realized from the Cogebanque acquisition in Rwanda, subsidiaries now account for 47% of total loans, up from 46% in 2023, and contribute 47% of profit after tax.
The global operating environment characterized by macroeconomic shocks saw the Group continuing with its conservative and prudent defensive approach by booking adequate loan loss provisions amounting to Kshs 12.7 billion. This has resulted in an NPL coverage ratio of 67% with a Non-Performing Loans (NPL) ratio of 13.4%, way below the latest published industry average of 16.7%. The Group continues to make significant strides in its differentiated managerial strategy and in enhancing its control environment to better position it to navigate the challenging macroeconomic and complex regulatory landscape while driving sustainable growth. The Group’s continued investment in modernizing its technology infrastructure coupled with high inflation has seen its expenses excluding provisions increase by 19%.
The Group recorded a 9-month Profit after Tax of Kshs.40.9 billion, representing a 13% year-on-year growth, with earnings per share increasing to Kshs.10.4, up from Kshs.9.2. Regional subsidiaries accounted for 51% of the profit for the period. This performance is complemented by strong capital buffers, with a core capital ratio of 15.9% and a total capital ratio of 18.3% versus regulatory thresholds of 10.5% and 14.5%, respectively.
“We are proud that the Group has a sufficient cushion on its key balance sheet buffers of liquidity, capital and NPL coverage while at the same time it continues to report above industry average profitability with return on average equity of 24.5% and return on average assets of 3.1%,’’ added Dr. Mwangi.
Having disrupted and transformed the banking industry, EGH identified insurance as critical to contribute to social economic prosperity by ensuring business and individual resilience and security. The Group was recently granted a general insurance license in addition to the already existing life assurance license. With this, the Group will offer holistic and integrated financial services to corporate, SME and retail customers by availing insurance solutions for all customer needs for protecting life, health, and wealth through its diverse product offering. Equity Life Assurance (Kenya) being the first underwriting subsidiary of the Group posted 181% year-on-year profit before tax, closing at Kshs. 1.07 billion year-to-date up from Kshs. 381 million for the same period last year. ELAK had a capital adequacy ratio of 141%, indicative of the business’ strong ability to meet its obligations to customers. With return on average assets at 4.6% and return on average equity at 57.8%, ELAK continues to contribute positively towards the Group’s performance.
By leveraging on the strategic capabilities and partnerships in banking, healthcare, distribution, SMEs, agriculture and technology sectors, the Group aims to provide customer-centric, digital-first and efficient products that are accessible to millions of customers and enable them to bridge the protection gap and fulfil their goals. EGH’s extensive branch network, as well as unparalleled network of over 1.1 million agents and merchants, continues to play a critical part in the insurance distribution strategy for all customer segments by ensuring ease of access and service for customers. As of 30th September 2024, the Group had issued over 13.2 million life policies and has served 5.8 million unique customers consuming life assurance and pension products, since inception.
The Group’s transformation is technology-led and is enabling business under its One Equity offering, which enables self-services with unparalleled convenience based on freedom of channel choice. Digital channels dominate with 86% of transactions, Agency channels process 8% of transactions while ATMs, Merchant acquiring and branches each process 2% of transactions. The Group has rolled out a common Product House that allows cross-selling and bundling of products under the One Equity offering – a one stop shop for financial services.
The Group has developed an iconic brand and was ranked one of the most valuable on the Nairobi Securities Exchange (NSE) and Africa’s top banking brand. Equity Group Foundation has continued to engage young people in skilling, upskilling and economic empowerment. Under the Education and Leadership Development program, EGH commissioned 113 Equity Leaders Program (ELP) scholars from Kenya, Rwanda, Uganda and DRC who received full scholarships to pursue their university education in various global universities across the world. The scholarships, worth Kshs. 2.8 billion (USD. 2.7 million) saw 13 students admitted to Ivy League Universities, bringing the total number of Equity Leaders Program Scholars who have attended the Ivy Leagues to 204. The total number of scholars that have attended global universities through this program is 970. Additionally, 3,979 scholars have been supported on full scholarship to access Technical and Vocational Education and Training (TVET). Against the backdrop of a challenging macroeconomic environment, Equity Group Foundation has offered customized capacity building programs to 596,773 Micro and Small Enterprises (MSMEs) that received training on entrepreneurship, with a total of Kshs. 323.3 billion disbursed to 315,225 MSMEs under the Young Africa Works Program. This program is targeted at creating jobs for young people.
The Group’s impact continues to be felt in climate action, where the International Finance Corporation (IFC) recognized Equity as having the highest number of climate finance-eligible transactions, most of which were in climate adaptation and mitigation in agriculture. The Group has also partnered with Microsoft and Mastercard Corporation to digitize 30 million customers in agriculture under the Community Pass Initiative, undertaken under the Mobilizing Access to the Digital Economy (MADE) Alliance which Equity Group joined as the first Africa partner.
To continue to support the spectrum of customers and remain an inclusive banking institution, Equity Bank has signed agreements to support refugees and their host communities to become empowered members of society with IFC and a regional Africa agreement with UNHCR to support refugees to pursue their own goals of entrepreneurship. In addition, the Equity Group Foundation also entered into a global agreement to support small-scale farmers to move from subsistence farming to sustainable agriculture.
To support the diaspora community engagement and investments on the continent, the Group signed agreements to expand its partnership with ZEPZ, which operates Sendwave and Worldremit to expand diaspora transfers through Equity digital channels.
During the quarter under review, the Group unveiled its 2023 Sustainability Report which underscored its commitment to advancing sustainability through the enhancement of its strategy from a twin-engine model to a holistic tri-engine model focusing on Social, Economic, Nature and Environment all driving a sustainable business strategy.
Dr Mwangi said, “Despite operating in a challenging environment, Equity Group remains committed to sustainable practices. Our recently unveiled Sustainability Report highlights the Group’s strategic approach to embedding sustainability. As an early adopter of the Taskforce for Nature-related Financial Disclosures (TNFD) framework in Africa, and the Africa Natural Capital Alliance (ANCA) the Group is not only focused on sustainable customer solutions but also actively supports nature restoration, having achieved the significant milestone of planting 30 million trees. Furthermore, Equity Bank continues to lead in climate finance by extending over USD 200 million in climate finance initiatives.”
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