Equity Group Holdings has reported strong first quarter results, with profit after tax for the period ended March 31, 2024, growing by 25% to a record Kshs.16 billion compared to a similar period last year. The company’s strong leadership decision-making and an agile balance sheet drove the swift recovery. Bold decisive actions saw growth in deposit placements to 11% compared to the deposit growth of 29% registered for the year ended 31st December 2023. Growth in long-term borrowed funds saw a decline of 21% year on year for the period ended 31st March 2024 as the Group paid out maturing repriced expensive dollar denominated loans.
Given the elevated credit risk characterized by a high non-performing loans environment, the Group enhanced credit risk underwriting, resulting in a 3% year on year growth in loan book as at 31st March 2024 compared to a 26% growth rate for the year ended 31st December 2023. This also led to re-allocation of lending from private sector credit to public sector lending through government securities, which grew to 21%. Consequently, the cost of credit risk dropped to 2.9% for the period to 31st March 2024 from 4.4% for the year ended 31st December 2023.
There was slow customer deposits growth and decline in long-term loans yielding a lower year on year growth of interest expense for the reporting period to 31st March 2024 to 41% compared to 53% for the year ended 31st December 2023. Interest income for the period to 31st March 2024 grew to 33% compared to 30% for the year ended 31st December 2023. Growth of net interest income accelerated to 28% for the period ended 31st March 2024 compared to 21% for the year ended 31st December 2023. Provisions grew to 84% for the period ended 31st March 2024 compared to the 139% for the year ended 31st December 2023. NPL coverage improved to 68.5% compared to 67.3% reported on 31st December 2023.
Through efficiency pursuits at the operational level, growth in total costs declined from 52% for the year to 31st December 2023 to a growth of 28% for the period to 31st March 2024. Digitization and automation of processes have significantly enhanced convenience and ease to customers in self-serving using own devices and 3rd party infrastructure, shifting the cost structure of the Group from fixed cost to variable costs.
Equity Group, a Kenyan financial services company, has built a strong liability franchise with 20 million deposit customers contributing Kshs 1.236 trillion out of the Kshs 1.69 trillion. The group has built a diversified loan portfolio of Kshs.779 billion out of the total funding of Kshs.1.69 trillion, spread 40% among corporates and large enterprises, 26% among micro, small and medium enterprises, 28% retail and consumer, and 6% among public service institutions in all sectors and segments of the real economy.
The group has successfully transformed from a Kenyan banking leader to a regional systemic financial services leader through its relentless execution of the Africa Recovery and Resilience Plan (ARRP). It is currently in the top five position in 5 out of 6 countries it operates in, with operations in 3 of the countries being the top 2 market leaders. The regional banking subsidiaries contributed 63% of the Kshs.20.4 billion profit before tax with a return on average equity of 27.6%, cementing the Group’s position as the regional banking leader.
Equity Group’s strategy to evolve with the needs of its customers and the economies it helps to connect and integrate has led to business diversification beyond financial inclusion by diversifying offering and moving up the value chain as it scales and connects fragmented supply chains and trade routes. Non-funded income contributed 43.9% of the total income of Kshs.49.6 billion at Kshs.21.8 billion. Treasury contributed 30% of all gross income of Kshs 64.8 billion at Kshs.19.6 billion, while Trade Finance revenue grew at 22% to Kshs. 3.1 billion and off-balance sheet Trade Finance facilitation grew by 23% to Kshs.205.6 billion.
The new life insurance business took a strong start with robust growth in its second year of operations, with profit after tax grew 106% to Kshs.321 million, total insurance assets grew by 288% to close at Kshs.20.8 billion, and return on average equity grew 25% to 54% up from 43%. This confirms that there is a significant opportunity in insurance by providing relevant, innovative, and technology-driven solutions to the underserved.
The Equity brand has evolved from purpose-driven financial inclusion to provide dignity and change lives while expanding opportunities for wealth creation using financial tools. It operates on a twin engine, a sustainability engine and an economic engine propelled by a strong purpose to transform Africa through the Africa Recovery and Resilience Plan. The brand has won several awards, including the Oslo Business for Peace Award, the Global Vision Award, the Ernst & Young world Entrepreneur Award, the Forbes Africa Persons of the Year, Bloomberg top 50, and Financial Times top 50 thought Leader.
Equity Group has embarked on a unique opportunity of matching commercial and operational capabilities to match the global brand through systems and processes re-engineering, product house, and people competencies that deliver on customer value proposition that match the global brand within the robust governance and strategic plan. As the global macro-economic headwinds break and paves the way for the global recovery, Equity Group is strategically and uniquely positioned to tap into the growth potential of East Africa’s thriving eco-system of trade connections.
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