The Equity Group has announced a third quarter profit after tax up of Ksh. 17.46 Billion which is a 10% rise from the previous year which was Ksh. 15.83 Billion.
This rise in profitability was on the back of a rise in the net interest income grew by 10% to Kshs 32.29 Billion up from Kshs 29.47 Billion in the previous period. Non funded income grew by 14% to Kshs. 22.54 Billion up from Kshs. 19.83 Billion to lift total income by 11% to Kshs 54.83 Billion up from Kshs. 49.3 Billion.
On the other hand, total costs rose marginally to Ksh. 30.02 Billion up from Ksh. 26.73 Billion in the previous year. This was due to a rise in the loan loss provision to Ksh. 1.88 Billion up from Ksh. 1.32 Billion in the previous year. Staff costs also increased by 13% to 9.32 Billion while operating expenses increased by 12% to Ksh. 30.02 Billion.
The cost to 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 cost income ratio was underpinned by efficiency and cost optimization driven by innovation and digitization. 97% of all transactions now happen outside the branch while 93% of all the Group loan transactions are via the mobile channels.
The balance sheet grew by 21% to Kshs. 677 Billion up from Kshs 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 were funded by a growth of 19% in deposits which grew to Kshs 478.1 Billion up from Kshs 402.2 Billion. Shareholders’ funds have grown by 20% to Kshs. 108.7 Billion up from Kshs 90.7 Billion while long-term funding has grown by 18% to Kshs 66.3 Billion reflecting a stable diversified mix of funding.
The Group has been able to achieve a stable diversified funding strategy with customer deposits, shareholders’ funds and long-term debts contributing 71%, 16% and 10% of the funding respectively. These funds have been deployed 52%, 24% and 16% on loans, government securities and cash and cash equivalents respectively allowing them to quickly respond to opportunities arising from changes in monetary and economic policies. The agile balance sheet reflects a liquidity of 59.1% in Kenya and 54.2% at the Group.
Their focus on quality and diversification of the asset portfolio has resulted in a loan portfolio that is distributed 73% and 27% in local and foreign currency respectively by borrowers 60%, 23%, 14% and 3% in MSME, consumer, large enterprises, and agriculture respectively. NPL’s are at 8.3%, 430 basis points lower than the sector NPL ratio of 12.6%. NPL coverage on IFRS 9 stands at 78% in Kenya and 74% at the Group level. To fortify the asset quality, the Group increased its cost of risk to 0.77% up from 0.62% resulting in increase of loan loss provision by 42% to Kshs 1.88 Billion up from Kshs. 1.32 Billion.
The scaling of the business through geographical expansion has enabled them to achieve impressive results. The regional subsidiaries have grown their assets by 26% to reach a contribution of 27% of the Group’s asset base. Two of the subsidiaries 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 17.7% up from 15.9%. This enabled the Group to register a RoAE of 22.9% and a Return on Average Assets (RoAA) of 3.7%.