Equity Bank’s 2016 net profit drops by 5.9% to Ksh. 15.2 Billion

James Mwangi, CEO Equity Bank

Equity Bank Group has today released their full year 2016 results today and just like their peers the net profit has declined by 5.9% to Ksh. 15.2 Billion from Ksh. 16.2 Billion in 2015. On the other hand their total operating income rose by 12.5% from the previous year to Ksh. 50.3 Billion.

This rise in operating income was on the back of a massive 87% increase in the interest income from government securities to Ksh. 6.7 Billion. This follows a trend in the banking industry whereby banks are preferring to invest heavily in risk free assets like government securities at the expense of lending. This explains the 5% decline in loans and advances to customers to Ksh. 213 Billion which led to the marginal rise in interest income from loans by 6.8% to Ksh. 35 Billion in the period. Fees and commission from loans and advances also experienced a 19% decline to Ksh. 3.8 Billion.

Total operating expenses rose by 23% to 27.5 Billion, this was in a large part due to a quadrupling of the loan loss provision from Ksh. 1.2 Billion in 2015 to Ksh. 5 Billion representing a 293 % increase. This goes to show the tough operating environment that many businesses in Kenya are dealing with as according to the Equity Bank CEO James Mwangi this was mostly brought about by lending to the corporate sector where NPL’s grew by 6% from zero the previous year.

Customer deposits increased by 17% to Ksh. 277 Billion which gives the bank a good liquidity ratio of 47.7% as compared to 29.1% in 2015. This puts the bank in a very good position to weather the shocks in their operating environment.

The bank’s digitization efforts seem to be bearing fruit with the new channels like Equitel, Eazzy Banking and Agency Banking seeing growth in transactions. Equitel handled 227 million transactions, Agency Banking 62 million transactions, ATMs 24.8 million transactions while branches handled 20.4 million transactions. This reflects Equity’s aim to move away from brick and mortar to a virtual bank which has helped it to improve efficiency and cost savings. As a result their cost to income ratio has moved from 47.1% to 44.8% and they are aiming to further reduce it to 42%. In as much as the bank is digitizing operations, the CEO Dr James Mwangi has stated that they will not be laying staff but rather hiring more people.

Earnings per share for the bank stands at Ksh. 4.38 and the board has proposed a dividend payout totaling Ksh. 7.5 Billion.