Equity Group Holdings PLC has posted a Ksh. 9.1 Billion net profit for the half year results for the period ended 30th June 2020. This reflects a 24% decline in profitability from Kshs.12.0 billion Billion from a similar period last year.

In the period, net interest income was up 17% to Kshs.24.6 Billion up from Kshs. 21.1 Billion the previous year driven by a 22% growth in loan book from Kshs.320.9 billion to Kshs.391.6 billion. Non-funded income declined by 3% from Kshs.14.5 billion to Kshs.14.1 billion as a result of the waiver of mobile transaction fee in Kenya since April 2020 to drive behavior change towards virtual banking enabled by mobile technology; and lower transactional activity given weak economic activity.

At the same time, the bank’s customers shied from use of Merchant Banking and Agency Banking as transactional channels with merchant transactions stagnating as commissions declined by 10% from Kshs.103.3 million to Kshs.93.3 million as agency cash in cash out transaction volume declined by 20% from Kshs.54.031 billion to Kshs.42.975 billion with resultant commission declining by 25% from Kshs.1.055 billion to Kshs.789 million. However, retail digital commerce payments Eazzy Pay and Pay with Equity recorded 49% growth in cumulative number of transactions from 1.152 million to 1.719 million transactions as value of transactions grew by 52% to reach Kshs.9.8 billion up from Kshs.6.4 billion.

The bank’s total costs increased by 44% to Kshs.26.7 billion up from Kshs.18.6 billion driven by a 15-fold increase in loan loss provision which increased to Kshs.7.7 billion up from Kshs.500 million in recognition of portfolio risk associated with the adverse disruption of the COVID-19 pandemic.

The bank’s balance sheet grew by 17% from Kshs.638.7 billion to Kshs.746.5 billion driven by 19% growth in customer deposits to Kshs 543.9 billion from Kshs 458.6, funding that was deployed to grow loans to customers by 22% and investment in Government securities by 20%. Regional subsidiaries grew faster increasing their contribution to the Group profitability to 28% up from 26% same period the previous year. Post balance sheet date, the Group completed the acquisition of 66.53% of BCDC the second largest bank in DRC paving way for the Group to amalgamate its two subsidiaries in DRC.

As a response to the pandemic, the bank has instituted defensive and offensive strategies. As part of the offensive strategy, the Bank increased lending to agriculture and agricultural processing growing credit to the sector by 40%, while credit to the enterprises grew by 28% as resources were directed to Personal Protective Equipment (PPEs) production in the region. To support clients comply with the health protocols, the Group focused on virtualization and digitization of the Bank, and by 30th June 2020, 98% of all cash transactions were happening outside the branch network with 83% of transactions being on the mobile platform. Resources were also dedicated to enhancing fintech innovation in Diaspora remittances to enable social payments reach families that saw regional diaspora remittances growing by 57% from Kshs.66.6 billion to Kshs.104.9 billion.

On the defensive strategy the Group focused on efficiency and cost optimization that resulted in the Group cost income ratio declining from 52.8% to 48.8%. The Group increased its portfolio credit provision 15-fold from Kshs. 500 million to Kshs.7.7 billion increasing the Group’s NPL coverage from 64% to 73%. To mitigate for loss of mobile transactions fee and merchant banking fees and commissions, the Group focused on Diaspora remittances and increased revenues by 51% from Kshs.398 million to Kshs.601 million while increasing forex income by 20% to Kshs. 2.231 billion up from Kshs.1.859 billion.