Equity Group Holdings has announced a remarkable recovery, posting a 25% growth in profit after tax for the quarter ended March 31, 2024. The Group’s profit after tax stood at Kshs 16 billion, a record high, driven by strong leadership decision-making and an agile balance sheet.
The Group’s deposit growth slowed down to 11% compared to 29% in the previous year, as it focused on avoiding expensive deposits. Long-term borrowed funds declined by 21% year-on-year, as the Group paid out maturing repriced expensive dollar-denominated loans. Despite the challenging credit risk environment, the Group’s loan book grew by 3% year-on-year, driven by a strategic shift towards public sector lending through government securities.
The cost of credit risk dropped to 2.9% for the quarter, down from 4.4% in the previous year. The loan-to-deposit ratio stood at 63%, compared to 65.3% in December 2023. Interest income grew by 33%, while net interest income accelerated to 28% growth. Provisions grew by 84%, and NPL coverage improved to 68.5%.
Total costs declined by 28%, leading to an improved cost-to-income ratio of 47.1%, down from 52.3% in the previous year. The Group’s digitization and automation efforts have enhanced customer convenience and shifted the cost structure from fixed to variable costs.
Dr. James Mwangi, Equity Group’s Managing Director and CEO, attributed the strong results to the Group’s ability to adapt to the new normal of operating in a volatile, uncertain, complex, and ambiguous environment. He noted that the Group’s defensive strategy, anchored on strong governance, leadership, and values-based organization culture, has underpinned the recovery and turnaround.
Equity Group’s diversified loan portfolio of Kshs 779 billion is spread across 40% among corporates and large enterprises, 26% among micro, small and medium enterprises, 28% retail and consumer, and 6% among public service institutions. The Group’s NPLs have peaked at an elevated level of 13.2%, but compare favorably with the industry NPL ratio of 15.5%.
The Group’s 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, with non-funded income contributing 43.9% of the total income.
The Group’s life insurance business has taken a strong start, with profit after tax growing 106% to Kshs 321 million, while total insurance assets grew by 288% to close at Kshs 20.8 billion.
Equity Group has embarked on a unique opportunity to match 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. As the global macro-economic headwinds break and pave the way for global recovery, Equity Group is strategically and uniquely positioned to tap into the growth potential of the opportunity of East Africa’s thriving eco-system of trade connections.