In the face of a challenging global macroeconomic landscape characterized by persistent high inflation, elevated interest rates, volatile exchange rates, and the devaluation of emerging economies’ currencies, Equity Group has unveiled its 2023 half-year results, showcasing remarkable resilience. Despite these adversities, the Group has shown a funding growth of 23%, primarily driven by a 21% surge in customer deposits and a 29% increase in shareholders’ funds—a result of the recovery of mark-to-market losses on Eurobonds.
Net loans to customers have also experienced substantial growth, marking a 26% increase, while investments in government securities have surged by 33%. The yields on these government securities have risen to 11.1% from 10.1%, and the yields on loans have climbed to 11.9% from 11.4%. Simultaneously, the cost of deposits has risen to 2.9% from 2.3%, leading to an increase in the cost of funding to 3.7% from 2.8%, culminating in a profit after tax of 9%. This profit reflects the impact of the prevailing operating microenvironment’s volatility.
Dr. James Mwangi, the Group Managing Director and CEO, stated during the release of the half-year financial results, “Our strategic pursuits have adeptly positioned us to navigate the challenges presented by macroeconomic headwinds. Expansion into new regions and diversification of business endeavors have reduced our reliance on the contribution of the Kenyan banking subsidiary, with other subsidiaries contributing a significant 46% to total assets and 45% to Profit Before Tax, primarily fueled by insurance and our business in the Democratic Republic of Congo (DRC).”
The focus on non-funded income growth has proven fruitful, with total income growing by 24%, driven by an impressive 42% surge in non-funded income and a 17% increase in net interest income. Notably, gross trade finance revenue soared by 117%, trade finance-related lending grew by 46%, FX total income expanded by 68%, and diaspora flows surged by 146%, accounting for 12% of all client FX volumes.
Amid the challenging landscape, Equity Group maintained a defensive strategy, ensuring a strong liquidity ratio of 51.1%, as well as robust capital ratios of 15.1% for core capital to risk-weighted assets and 19% for total capital to risk-weighted assets. Despite the economic headwinds, the Group maintained an impressive Non-Performing Loans (NPL) ratio of 9.8%, notably below the industry average of 14.9%.
To fortify its capabilities in the volatile, uncertain, complex, and ambiguous (VUCA) operating environment, the Group bolstered its leadership with skilled and experienced executives. While staff costs grew by 32% and other operating costs by 33%, prudent management led to the growth of cost of credit risk to 1.9% from 1.3%, supported by an 89% growth in provisions to cover the risk of rising portfolio at risk (PAR) ratios.
East Africa’s standing as the fastest-growing region in the world remained steadfast. By leveraging an offensive strategy that emphasizes payments, trade finance, FX business, and non-funded income, combined with a digitization drive for efficiency and a defensive approach to liquidity, capital, and asset quality, Equity Group fulfilled its outlined financial objectives. The Profit After Tax stood at Kshs. 26.3 billion, reflecting a Return on Equity of 27.7% and a Return on Assets of 3.5%.
Dr. Mwangi concluded by expressing confidence in Equity Group’s strategic position as a regional systemic bank among the top three in five of its six operating countries. This positioning aligns with the support of further integration and increased cross-border trade under the African Continental Free Trade Area. Moreover, it contributes to sustaining East Africa’s status as the world’s fastest-growing common market, promising long-term value-creation opportunities.
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