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In a challenging global economic landscape marked by persistent inflation, fluctuating interest rates, and currency devaluation among emerging economies, Equity Group has demonstrated resilience with its impressive 2023 half-year results. The company’s unwavering performance reflects its strategic approach to navigating a complex macro environment.
Growth Across Key Metrics
Equity Group’s 2023 half-year results showcase significant growth and stability across key metrics:
Asset Growth: The Group’s assets grew by an impressive 23%, reaching Kshs. 1.645 trillion.
Loan Expansion: Net loans to customers experienced a notable 26% increase.
Subsidiary Contribution: Subsidiaries contributed 46% of total assets and 45% of profit before tax, highlighting the diversified business model.
Return on Equity: An impressive Return on Equity of 27.7% was achieved.
Financial Landscape
Despite the global challenges including high inflation and volatile exchange rates, Equity Group achieved remarkable progress:
- Customer deposits grew by 21%, and shareholders’ funds increased by 29%, largely due to the recovery of mark-to-market losses on Eurobonds.
- Investments in government securities grew by 33%, with yields on these securities reaching 11.1%.
Yields on loans increased to 11.9%, while the cost of deposits rose to 2.9%, driving the cost of funding to 3.7%.
Diversification and Resilience
Equity Group’s CEO, Dr James Mwangi, emphasized the strategic positioning of the company to overcome macroeconomic headwinds.
- Diversification Success: Geographic expansion and diversification efforts led to reduced reliance on the Kenyan banking subsidiary. Other subsidiaries, particularly in insurance and the Democratic Republic of Congo (DRC) business, contributed significantly.
- Non-Funded Income Growth: The company successfully increased non-funded income by 42%, contributing to a 24% overall growth in total income.
- Trade Finance and FX Success: Trade finance revenue surged by 117%, and trade finance-related lending increased by 46%. Foreign exchange (FX) income saw a 68% increase, with diaspora flows growing by 146%.
Financial Strength and Asset Quality
Equity Group maintained robust financial ratios and asset quality management:
- Liquidity: A defensive approach ensured a strong liquidity ratio of 51.1%.
Capital Ratios: Core capital to risk-weighted assets and total capital to risk-weighted assets remained solid at 15.1% and 19%, respectively. - NPL Management: Despite the challenging economic conditions, the Group’s non-performing loan (NPL) ratio stood at 9.8%, well below the industry average of 14.9%.
- Cost of Credit Risk: Prudent management resulted in a 1.9% cost of credit risk, supported by provisions to cover rising portfolio at risk (PAR) ratios.
- Strengthening Leadership and Operational Efficiency
Equity Group proactively responded to the volatile environment
- Leadership Enhancement: The Group recruited skilled executives to align capabilities with growth challenges.
- Operational Costs: Staff costs grew by 32%, and other operating costs increased by 33%, reflecting investment in operational efficiency.
A Promising Future
In a rapidly growing East African region, Equity Group remains a pivotal player
- Regional Growth: East Africa remains one of the world’s fastest-growing regions, with a focus on fiscal consolidation and budget deficit reduction.
- Strategic Outlook: Equity Group’s focus on payments, trade finance, and FX business, along with digitization for efficiency, positions it well to navigate both offensive and defensive strategies.
Sustained Value Creation
With a remarkable Kshs. 26.3 billion profit after tax and impressive returns on equity and assets, Equity Group is primed to support regional integration and cross-border trade under the African Continental Free Trade Area.
Group CEO, Dr Mwangi, expressed confidence in the company’s ability to contribute to the region’s sustained long-term value creation and continued growth.
Equity Group’s strong performance in the face of challenging circumstances underscores its resilience, strategic acumen, and commitment to delivering value to stakeholders.
As the financial landscape evolves, Equity Group’s proactive approach and diversified portfolio position it for continued success in the dynamic African market.
