Equity Bank has announced a Ksh 24.78 billion profit before tax for the period up to September 30, 2019. The Group’s net earnings grew by 10% to Ksh 17.46 billion from Ksh 15.83 billion reported over a similar period in 2018.
Loans and advances to customers grew by Ksh 60.5 billion to Ksh 348.9 billion up froom Ksh 288.4 billion reflecting a growth of 21% with 75% of the loan portfolio held by enterprises. 67% of the loan portfolio is spread in financing trade, housing, energy, water, transport and communication, tourism, restaurants and hotels.
Equity has increased its lending to enterprises in the real economy by 21%. This was supported by the Young Africa Works partnership between Equity Group, Mastercard Foundation and the Kenya Government whose objective is creating 5 million decent jobs for young people.
Young African Works program has seen 5,740 young people and women go through a 13-week financial education training program while 6,275 enterprises have commenced a 3-year entrepreneurship education program since June 2019.
The group’s balance sheet grew by 21% to Ksh 677 billion up from Ksh 560.4 billion driven mainly by 21% growth in net loans and 40% growth in cash and cash equivalent. Investments in government securities decelerated to only grow by 5% as more funds were reallocated to lending to the real economy. The assets are funded by a growth of 19% in deposits which grew to Ksh 478.1 billion up from Ksh 402.2 billion. Shareholders’ funds have grown by 20% to Ksh 108.7 billion up from Ksh 90.7 billion while long-term funding has grown by 18% to Ksh 66.3 billion reflecting a stable diversified mix of funding.
The Group’s net interest income grew from Ksh 29.47 billion to Ksh 32.29 billion a growth of 10%. Non funded incomce grew by 14% to Ksh 22.54 billion from Ksh 19.83 billion to lift the total income by 11% to Ksh 54.83 billion up from Ksh 49.3 billion. The faster growth in total income above net interest income reflects success of strategic pursuit of the Group to grow quality income through non funded income growth.
Merchant banking business grew by 27% to reach a transaction volume of Ksh 88.4 billion up from Ksh 69.6 billion while merchant commission grew by 19% to reach Ksh 1.74 billion up from Ksh 1.46 billion. The volume of diaspora remittances grew by 28% to reach Ksh 101.9 billion up from Ksh 79.8 billion. Forex trading income and commission grew by 20% to Ksh 2.84 billion up from Ksh 2.37 billion with 23% of the traded forex generated by diaspora remittances.
The Group’s cost income ratio improved to 51.3% from 51.5% driven by a faster improvement in the cost to income ratio of the main subsidiary Kenya to 45.9% from 47%. The improvement in the cost income ratio is underpinned by efficiency and cost optimization driven by innovation and digitizatio. Digitization has helped transform banking from a place you go to something you do. 97% of all transactions now happen outside the branch while 93% of all group loan transactions are via the mobile channels.
Transactions via third party channels are distributed as, 77% on mobile, 12% on agency network, 3% through merchants and only 4% and 3% on ATMs and branches respectively.
The Group says it has gone beyond digitizing payments and the new frontier is digitization of services with the fastest growth now being registered by digitization of retail commerce through EazyPay that has seen the volume and value of transactions grow by 91% to 149% YoY.
Corporate internet banking has registered a growth of 72% and 69% on volume and value of transactions respectively. Online trading of Forex on EazyFx platform grew 100% to register Ksh 7.3 billion in transactions value.
The Group has achieved a stable diversified funding strategy with customer deposits, shareholders’ funds and long-term debts contributing 71%, 16% and 10% of the funding. These funds were deployed as 52%, 24% and 16% on loans, government securities and cash and cash equivalents respectively.
The Group’s loan portfolio is distributed 73% local and 27% foreign currencies by borrowers 60%, 23%, 14% and 3% MSMEs, consumer, large enterprises and agriculture respectively.
NPLs are at 8.3%, 430 basis points lower than the industry NPL ratio of 12.6%. NPL coverage on IFRS 9 stands at 78% in Kenya and 74% at Group level. To fortify the asset quality, the Group increased its cost of risk to 0.07% up from 0.62% resulting in increase of loan loss provision by 42% to Ksh 1.88 billion up from Ksh 1.32 billion.
The Group saw its regional subsidiaries grew their assets by 26% to reach a contribution of 27% of the Group’s asset base. Rwanda and Uganda registered a return on average equity (RoAE) of 23.9% and 21.2% respectively, covering their cost of capital, whereas DRC continued its impressive growth in RoAE to 1737% up from 15.9%. This enabled the group to register an RoAE of 22.9% and a return on Average Assets (RoAA) of 3.7%.
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