The group rescheduled 32% of all client loans to support recovery from COVID-19 pandemic
| THE INDEPENDENT | Equity Group Holdings has recorded a 99% jump in profit after tax to Ksh40bn for the year ended December 2021 riding on higher yields from interest paid by borrowers and an improved business environment.
The lender also reported a 29% growth in balance sheet to Kshs1.305 trillion from Kshs1.015 trillion and a 29% growth in customer deposits toKshs959billion.
This makes it the largest bank in Kenya and in the region by all key parameters – balance sheet, profitability, market capitalisation and customer base. There was an improvement in non -performing loans from 11% to 8.3% and increase of provision coverage from 89% to 98%.
For shareholdings, there was a 98% growth in earnings per share to Kshs 10.40 from Kshs 5.20. A dividend pay-out of Kshs 11.3 billion was reported, representing a 50% increase from last dividend pay-out for 2018.
“When COVID- 19 struck, Equity Group sought its true north, its purpose and commitment to support its members. The Board and Management decided to focus on saving lives and livelihoods, giving dignity, and expanding opportunities for wealth creation while keeping the lights of the economies on,” the lender said in a statement.
During the period it focused on supporting customers and in the process increased and accelerated loan disbursements and growth by over 29% and 23% for the two years respectively while the economy was plummeting to a GDP growth rate of negative 0.1% from a high of 5.8%.
Income increased during the period
Net interest income grew by 25% to Kshs 68.8 billion up from Kshs 55.1 billion. This was driven by a 23% growth in loan book to Kshs 587.8 billion up from Kshs 477.8 billion and an 81% growth in investment in government securities to Kshs 394.1 billion up from Kshs 217.4 billion.
Non funded income grew by 15% to Kshs 43.6 billion up from Kshs 37.8 billion driven mainly by trade finance, payment channels and foreign exchange trading income. Trade finance registered a 55% growth in revenue to Kshs 3.2 billion up from Kshs 2.1 billion.
Despite zero-rating mobile transaction offerings, transaction income grew by 37% to Kshs 10.4 billion up from Kshs 7.6 billion on the back of E-commerce and Merchant banking business.
Foreign exchange trading income grew by 33% to Kshs 8.3 billion up from Kshs 6.2 billion driven by diaspora inflows that grew 37% to reach Kshs 383.5 billion up from Kshs 279.4 billion.
Total income grew by 21% to surpass the psychological USD 1 billion mark to record Kshs 112.4 billion up from Kshs 92.9 billion the previous year.
Despite a 24% growth in staff costs to Kshs 19.1 billion, growth in other operating costs to Kshs 36.5 billion up from the Kshs 30.6 billion, total costs recorded a decline of 16% to Kshs 60.5 billion down from Kshs 71.9 billion driven by an 81% decline in loan loss provision to Kshs 4.9 billion down from Kshs 25.9 billion the previous year.
Meanwhile, total assets grew by 29% to Kshs 1.305 trillion up from Kshs 1.015 trillion driven by a corresponding 29% growth in customer deposits to Kshs 959 billion up from Kshs 740.8 billion resulting in excess cash being deployed in low yielding government securities at 9.6 %, while cost to income remained fairly constant at 49.1% up from 48.5%.
To strengthen resilience and expand economic opportunities for young people and women, Equity Group Foundation scaled up capacity building for Micro, Small and Medium Enterprises through the provision of financial literacy, entrepreneurship training and digital literacy under the Young Africa Works program in partnership with Mastercard Foundation.
To enhance regional expansion into Rwanda, Uganda, DRC and Tanzania, EGF scaled up its operations in food and agriculture and started establishing private-public partnerships jointly with various development partners to drive the growth of the sector.
In support of the economy during the COVID-19 crisis, the group waived mobile banking transaction fees amounting to Kshs2.9 billion and Kshs 1.2 billion of loan rescheduling fees to enhance disposable income of clients while easing the cost-of-living pressure to low-income households.
The group rescheduled loans amounting to 32% of all client loans to support businesses to survive, and households to realign to new and emerging opportunities.
The shareholders paid the price for two consecutive years foregoing dividends to backstop the risk of uncertainty and enable the group to enhance its capital buffers.
International financial and development partners worked with Equity to strengthen its capital buffers through US$265million of Tier 2 capital, and partial credit guarantees in a credit risk-sharing mechanism for sectors adversely affected by COVID – 19.
“This fortified our capital buffers and increased our ability to support our customers, enhanced liquidity buffers to 64% while mitigating cashflow risk during the uncertain times,” said James Mwangi, Equity Group Managing Director and CEO.
The bulk of customers’ engagement and consumption of banking products and services is now on digital channels of internet and mobile on self-service devices delivering a 24-hour banking experience and convenience.
“We have strengthened our business model to achieve an embedded shared value concept in our twin-engine of social and economic aspirations and deliverables,” Mwangi said.