Given the turbulence that the banking sector has experienced this year due to the failure of 3 banks together with the capping of interest rates, the expectation was that profits in the banking sector would drop significantly. However, there are those banks that were able to weather the storm and post good results top among them being Equity Bank.
Equity Bank’s Group Holdings profit before tax for the 3rd quarter grew by 18% to Ksh.21.5 billion while the total assets increased by 5% to hit Ksh.468 billion. Net interest grew by 26% to Ksh.32.3 billion while total cost increased by 13% to 27.4 billion, operating expenses on the other hand grew by single digit as the bank started to reap the benefits of digitization. The liquidity ratio has in Kenya was enhanced from 25% to 45% in and Capital ratio remained strong providing significant headroom for growth by the group. Return on Equity (RoE) for the Group increased from 25% over the same period last year to 26% while Return on Assets increased 4.3% to 4.5%. Overall Equity Bank Kenya saw its profits grow by 20% while profits before tax in Uganda and Democratic Republic of Congo grew by 130% and 16% respectively. These positive outcomes in the subsidiaries offset the loses incurred in the South Sudan subsidiary which occurred due to currency depreciation. Regional subsidiaries now contribute 30% of the Group’s total deposits, 18% of the total loans and 25% of the total group assets.
This good performance by Equity can be mainly attributed to an innovation and efficiency focus that has resulted in the cost income ratio declining from 53% to 49%. In Equity Bank Kenya, the cost income ratio has declined from 47% to 43%. Equitel has been identified as the most impactful innovation in contributing towards this efficiency and profitability.
Equitel, the mobile platform by the bank within its first year of operation in Kenya has been able to capture 15% of the total mobile money transfer market in both value and volume of transactions. The platform also processed nearly 3.5 million loans totaling to Ksh.30 billion which represented 84% of the loans granted by the bank in Kenya. The quality of loans processed through the platform is excellent with a recovery rate of 98%. Equitel has also been able to grow transactions by 142% to reach 150.8 million transactions during the period. The platform handled more transactions that the aggregated transactions processed by branches, ATMs and Agency networks. The Agency network on its part processed over 46 million transactions while the value of the transactions grew to Ksh. 250.8 billion up from Ksh. 43.5 billion the previous year.
The bank also recently launched the full scale digitization of the bank through Eazzy banking solutions. New Fintech driven Diaspora remittances channels, PayPal and Equity Direct grew their contribution to remittance processing from 22% to 30% of all Diaspora remittances processed. This digitization is expected to increase the bank’s transaction income as more people move to the digital banking platform due to the convenience it offers. The banks continued investment in technology moves them from the traditional brick and mortar which has a heavy fixed cost to a digital driven variable cost model which aligns with the changing preferences of banking sector customers.