The lender has registered a funding growth of 23% in the first six months of 2023, pushing its assets to about Sh1.645 trillion
By Silas Apollo
Equity Bank group, in its 2023 half year results, says that most of its business operations showed resilience, despite a tough operating global macro environment characterized by growing inflation and interest rates, volatile exchange rates and devaluation of currencies of emerging economies.
The growth, the bank adds, was largely driven by a 21% growth in customer deposits and 29% growth in shareholders’ funds, both resulting from a recovery of mark-to-market losses on Eurobonds.
Equally, net loans to customers registered a growth of 26% while investments in government securities grew by 33%. Yields on investment in government securities increased to 11.1% up from 10.1% while yields on loans increased to 11.9% up from 11.4%.
Costs of deposits, on the other hand, rose to 2.9% up from 2.3% driving cost of funding to 3.7% up from 2.8% generating a profit after tax of 9%, reflecting the volatility in the operating microenvironment.
While releasing the half year financial results, the group managing director, and CEO James Mwangi said that the growth was mainly influenced by the group’s strategic pursuits.
“Regional geographical expansion and business diversification has seen reliance on contribution of the Kenyan banking subsidiary reduced with other subsidiaries contributing 46% total assets and 45% of profit before tax, driven primarily by insurance and the DRC business,” Mwangi said.
“The drive to non-funded income growth registered good success with total income growing at 24% driven by a 42% growth of non-funded income and 17% growth of net interest income,” he added.
The CEO further noted that a defensive strategy saw liquidity ratio remain strong at 51.1% while capital ratios remained strong at 15.1% and 19% for core capital to risk weighted assets and total capital to risk weighted assets respectively.
Mwangi said that despite the challenging macro and micro economic environment, focus on asset quality management saw the group register an NPL ratio of 9.8% against an industry average of 14.9%.
Also, prudent management saw growth in cost of credit risk to 1.9% up from 1.3% driven by 89% growth in provisions to cover the risk of rising portfolio at risk (PAR) ratios.
“Given the VUCA operating environment the group strengthened its leadership bench by recruiting skilled and experienced executives to match the capabilities and competencies to the challenges of growth. Staff costs registered a growth of 32% while other operating costs grew by 33%,” said Mwangi.
“Given Equity Group’s strategy of focusing on payments, trade finance, FX business among other non-funded income while strengthening efficiency through digitization and defensive approach to liquidity, capital and asset quality buffers, the Group continued to deliver on its stated financial outlook,” he added.