Equity Group achieved a profit of Ksh 29.6 billion in the first half of 2024, marking an impressive 12% year-on-year increase. Notably, 50.2% of this profit was contributed by its regional subsidiaries. This strong performance was underpinned by robust capital reserves, with a core capital ratio of 15.8% and a total capital ratio of 18.4%, both comfortably surpassing the regulatory requirements of 10.5% and 14.5%, respectively.
The Group’s balance sheet expanded by 6%, outpacing the current inflation rate of 4%, with total assets reaching Ksh 1.75 trillion as of June 30, 2024. Regional subsidiaries played a significant role, contributing 49.7% of total assets.
Customer deposits grew by 11% to Ksh 1.3 trillion, which in turn boosted cash and cash equivalents by 55% to Ksh 341 billion and increased investment securities to Ksh 459 billion. As a result, Equity Group’s liquidity position remains strong at 57%, while its customer base has grown to 20.7 million.
During the announcement of the half-year results, Dr. James Mwangi, Equity Group Holdings’ Managing Director and CEO, highlighted the significance of the Group’s robust liquidity.
“We are optimistic that the strong liquidity of the Group has positioned us to effectively support our customers as the economy starts showing signs of improvement in the key markets we operate in, signaled by some of the regulators’ reduction of the Central Bank Reference rates. With the improved liquidity, the Group continued to optimize its balance sheet reducing leverage by Kshs.75 billion of expensive borrowings.” Dr. Mwangi stated.
Interest income increased by 22% to Ksh 84.4 billion, compared to Ksh 69.8 billion in the same period last year. Despite high inflation and rising interest rates, returns to customers in the form of interest expenses rose by 30% to Ksh 30.4 billion, up from Ksh 23.4 billion. Non-funded income also saw growth, reaching Ksh 5 billion, which contributed to a 16% increase in total income to Ksh 95.1 billion, up from Ksh 82.1 billion in the first half of 2023.
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Shareholders’ equity rose by 13% to Ksh 220 billion, further strengthening the Group’s ability to support the private sector-led Africa Resilience and Recovery Plan (ARRP) by investing in new subsidiary undertakings within its Insurance Group. Moreover, this positions Equity Group to capitalize on future market opportunities similar to the acquisition made in Rwanda in 2023.
“We are proud that the Group has sufficient cushion on its key balance sheet buffers being liquidity, capital and NPL coverage while at the same time it continues to report above industry profitability metrices with return of average equity of 26.7% and return on average assets of 3.4%,’’ Dr. Mwangi noted.
Loan loss provisions increased by 35% to Ksh 8.5 billion, ensuring that NPL coverage ratios remained at 70%, with a Non-Performing Loans (NPL) ratio of 12.9%, significantly below the industry’s latest published average of 16.3%. Furthermore, the Group’s ongoing investments in modernizing its infrastructure, coupled with high inflation, have driven a 27% rise in expenses.
Equity Group’s strategy of regional and product diversification continues to yield positive results, with the Kenyan banking subsidiary contributing 43% of revenue, down from 46% in the previous period. As business operations in the DRC expand and synergies from the Cogebanque acquisition in Rwanda are realized, subsidiaries now account for 47% of total loans (up from 44% in 2023) and contribute 51% of profit after tax.