Equity Group has posted a Ksh. 8.7 Billion net profit for the first three months to March which was a 64% rise from a similar period last year.
The rise in profitability was on the back of a 28% rise in the net interest income to Ksh. 14.8 Billion which was as a result of a 29% growth in the loan book to Ksh. 487.7 Billion. Non interest income also rose by 30% to Ksh. 25.5 Billion. Regional subsidiaries registered resilience and robust growth to contribute 40% of total deposits and total assets and 23% of profit before tax with Rwanda and Uganda delivering above cost of capital returns.
On the other hand, operating costs rose by eight per cent to Sh13.8 billion despite provisioning for loan defaults reducing by 64 per cent to Sh1.1 billion in appreciation of the improving economic situation.
Of the 31% of the loan book, or Kshs.171 billion Covid-19 accommodated or rescheduled loan book, Kshs.59 billion has resumed repayment with Kshs. 5 billion fully repaid and Kshs.3 billion behind schedule in repayment. Kshs.66 billion is expected to resume repayment within 6 months by 30th September 2021.
The Group reported a non-performing loan book of 11.3% compared to the industry average of 14.6%. Strong risk mitigation saw NPL coverage stand at 99% from a mix of provisions at 87% and 12% of credit risk guarantees.
According to the bank, rise in operating expenses was mainly as a result of a 25 per cent rise in staff costs to Ksh. 4 billion as the group incurred early retirement costs in DR Congo. This was due to a one-off cost for paying off 31 staff at the management level to avoid duplication of roles.
During the review period, Equity Group balance sheet expanded by 54 per cent to Sh1.07 trillion as customer deposits surged by 58 per cent to Sh790.6 billion. The group’s liquidity ratio closed the quarter at 60.6 per cent, with that of the Kenyan unit being 81.5 per cent. The regulator requires a minimum of 20 per cent.
Dr. James Mwangi, the Equity Group CEO, had this to say, “Our strategy; purpose-first, inclusivity, affordability, reach, agility and quality have proven resilient and sustainable. “We have adopted a two-pronged strategy of being offensive and defensive. We strengthened our capital buffers by retaining profits and withholding dividend payouts, took long-term loan facilities that strengthened our liquidity buffers, supported host communities and our clients to mitigate the impact of the crisis on them by waiving fees and rescheduling their loans to match loan repayments to new cashflow patterns. Internally, we focused on risk mitigation and management in a challenging environment, enhanced our NPL coverage through provisions and sought collaboration with development financial institutions on credit and risk sharing guarantees. We evolved our organization structure through strong governance focus on risk management, diversity of skills and competencies to enhance our succession planning and mitigation of key person risks.”