The lender has also recorded a surge in operational expenses during the same period under review
Kampala, Uganda | ISAAC KHISA | Regional lender, Equity Group Holdings, has recorded a huge surge in profits amidst the multi-faceted Covid-19 pandemic crisis of health, economic disruption and humanitarian challenges.
Latest financial results for the first quarter ended March 31, 2021, shows a 64% surge in profit after tax to Kshs8.7bn compared with the Kshs5.3bn last year, giving hope and recovery in the financial sector.
EGH’s total income grew 29% to Kshs25.5bn. However, loss loan provision, staff costs and other operating expenses increased from Kshs12.7bn to Ksh13.8bn during the same period under review. The non-performing loan book grew by 11.3% compared to the industry average of 14.6%.
“Our strategy; purpose-first, inclusivity, affordability, reach, agility and quality have proven resilient and sustainable” said James Mwangi, the Equity Group CEO while releasing the first quarter of 2021 financial results on May.26. “Purpose has proved profitable.”
Mwangi said EGH has adopted a two-pronged strategy of being offensive and defensive to remain resilient amidst the current challenges.
“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 cash flow patterns,” he said.
“Internally, we focused on risk mitigation and management in a challenging environment, enhanced our Non-Performing Loan 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,” he added.
Operationally, EGH focused on generating and growing non-funded income, treasury efficiency, geographical expansion and business diversification, business transformation through innovation and digitization, balance sheet optimization and agility, asset quality and risk mitigation while pursuing efficiencies and brand development through social impact investment.
EGH’s interest income grew by 32% while non-funded income grew by 30% to contribute 42% of total income.
Performance of subsidiaries
Regional subsidiaries in Uganda, Tanzania, Rwanda, South Sudan and DRC 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.
“Evolving economic, social, political governance reforms and environment have strengthened prospects for long-term sustained regional growth and investment, this coupled with development of physical and soft infrastructure enhance opportunities for private sector credit growth and productivity gains from cross border trade,” Mwangi said.
Meanwhile, the Group registered a balance sheet expansion of 54% to reach Kshs.1.07 trillion driven by a 58% growth in customer deposits underpinned by Kshs.140billion shareholders’ funds.
The Group took advantage of consumers’ lifestyle changes that acted as a tailwind to human adoption of technology resulting into change in consumer lives and behavior.
The Group changed its strategy to adopt to the changing environment and executed a rapid business transformation that saw 98% of all transactions being digital in count, and 65% of volume by value.
Mwangi said, over the last one year, the Group has witnessed firsthand as its customers adopted the mobile and internet technology channels on self-service devices making its financial services offering truly a 24-hour service and lifestyle.
Similarly, strong focus on asset quality saw the Group develop an investment portfolio mix that resulted in a market and sectoral diversification across currencies and different geographies.
The Group, which has now skipped dividend payout for the second consecutive year, made a net profit of Ksh20.1 billion last year, a 10.9 % decline from Kshs22.5 billion in 2019 as increased provision for coronavirus-related defaults took a toll.