EQUITY GROUP HOLDINGS REGISTERS KSHS.26.3 BILLION PROFIT AFTER TAX INITS 2023 HALF YEAR RESULTS
In the midst of a challenging global economic landscape marked by stubbornly persistent high inflation, elevated interest rates, volatile currency exchange rates, and the devaluation of emerging economies’ currencies, Equity Group has unveiled its half-year results for 2023, showcasing remarkable resilience. Despite these headwinds, the Group achieved a commendable funding growth of 23%. This expansion was driven by a 21% increase in customer deposits and a 29% surge in shareholders’ funds, buoyed by the recovery of mark-to-market losses on Eurobonds.
Key financial indicators showcased notable growth trends. Net loans to customers experienced a robust upswing of 26%, while investments in government securities surged by an impressive 33%. Yields on investments in government securities also witnessed an upward trajectory, rising from 10.1% to 11.1%. Similarly, yields on loans climbed from 11.4% to 11.9%. However, this growth in financial performance was accompanied by an uptick in the cost of deposits, from 2.3% to 2.9%, subsequently leading to an increase in the cost of funding, reaching 3.7%. Despite these challenges, the Group managed to achieve a profit after tax of 9%, emblematic of its adaptability in the face of a volatile operating environment.
Commenting on the release of the half-year financial results, Dr. James Mwangi, the Group Managing Director and CEO, emphasized the strategic resilience that has been embedded within the organization. He highlighted the success of the Group’s regional geographical expansion and diversified business portfolio, which enabled it to reduce reliance on the contribution of the Kenyan banking subsidiary. Notably, other subsidiaries contributed 46% of total assets and 45% of Profit Before Tax, with a substantial role played by insurance and the DRC business.
The Group’s drive for non-funded income growth also yielded fruitful outcomes, with total income expanding by 24%. This growth was propelled by a remarkable 42% increase in non-funded income and a 17% rise in net interest income. Additionally, strategic initiatives such as the growth of trade finance revenue by 117%, a 46% surge in trade finance-related lending, a 68% increase in FX total income, and a remarkable 146% growth in diaspora flows showcased the Group’s prowess in diversifying income streams.
Maintaining a defensive strategy amid the challenging economic landscape, the Group managed to keep its liquidity ratio robust at 51.1%. Capital ratios also remained strong, with 15.1% and 19% for core capital to risk-weighted assets and total capital to risk-weighted assets, respectively. This prudent approach allowed the Group to register an impressive Non-Performing Loans (NPL) ratio of 9.8%, surpassing the industry average of 14.9%. In addition, the Group’s diligent management efforts led to a slight increase in the cost of credit risk to 1.9%, driven by an 89% growth in provisions to cover the risk of rising portfolio at risk (PAR) ratios.
In response to the volatile operating environment, the Group fortified its leadership team by strategically recruiting skilled executives, ensuring alignment with growth challenges. Amidst these endeavors, staff costs and other operating costs increased by 32% and 33%, respectively.
Undoubtedly, East Africa continues to exhibit remarkable economic growth within the global landscape. The region’s governments are actively engaged in fiscal consolidation and budget deficit reduction efforts. In line with Equity Group’s strategic approach, focusing on non-funded income drivers such as payments, trade finance, and FX business while enhancing efficiency through digitization, the Group has succeeded in delivering on its financial outlook.
The 2023 half-year results reflect a Profit After Tax of Kshs.26.3 billion, representing a Return on Equity of 27.7% and a Return on Assets of 3.5%. Dr. Mwangi reiterated the Group’s strategic positioning as a regional systemic bank, ready to support further integration and cross-border trade under the African Continental Free Trade Area. This aligns with the region’s ambition to remain the world’s fastest-growing common market, fostering opportunities for sustainable value creation in the long term.