Equity Group net profit for the first three months to March rose 64 per cent to Sh8.7 billion driven by strong growth in both interest and non-interest income.
The bank’s earnings rose from Sh5.3 billion recorded in a similar quarter in 2020, placing it on a recovery path from last year’s fall in profits on the back of coronavirus-induced economic hardships.
Net interest income grew 28 per cent to Sh14.8 billion in line with 29 per cent growth in loan book to Sh487.7 billion.
Non-interest income, which is mainly derived from fees and commission, rose by 30 per cent to Sh25.5 billion, giving the lender a high income position.
“Our strategy; purpose-first, inclusivity, affordability, reach, agility and quality have proven resilient and sustainable,” said James Mwangi, Equity Group CEO.
Its subsidiaries in Tanzania, Rwanda, Uganda and DR Congo all posted growth in net profit, boosting the group’s bottom-line.
Regional subsidiaries now make up 40 per cent of total deposits and total assets and 23 per cent of pretax profits, with Rwanda and Uganda delivering above the cost of capital returns.
Loan loss provisions
Equity’s operating costs, however, 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 Sh171 billion loans that had been restructured on Covid-19 hardships, customers have resumed repayment on Sh59 billion, with Sh5 billion already fully cleared.
The lender says it expects another Sh49 billion to be performing by June and Sh20 billion to enter the same status by September.
“We have done a simulation of the Sh171 billion and only Sh3 billion has shown signs of stress and has been downgraded to category II as non-performing,” said Brent Malahay, Group Director Strategy.
Mr Mwangi said that the rise in operating expenses was mainly as a result of a 25 per cent rise in staff costs to Sh4 billion as the group incurred early retirement costs in DR Congo.
Equity Group acquired Banque Commerciale Du Congo (BCDC) and merged it with Equity Bank Congo (EBC) early this year, leading to one-off costs 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.
“A liquid balance sheet with Sh500 billion of cash, cash equivalents and government securities reflect the agility to redeploy funding seamlessly as the economies recover from the adverse impact of the Covid-19 multi-crisis,” said Mr Mwangi.