Equity Bank Group third quarter profits soars 26%

Equity Bank Group yesterday announced that its profit after tax for the third quarter of 2014 grew by 26% to Kshs. 11.2 billion up from Kshs. 8.9 billion in the same period last year.

With a complement of 9.2 million customers, the bank’s net income recorded enhanced growth during the trading period ending September 2014, in what Equity Bank Group CEO, Dr. James Mwangi attributed to growing economic activity across the region. Inter country and regional trade within the East African community has risen to above 30%.

The bank’s successful implementation of its regional expansion strategy saw Equity Bank Tanzania, Uganda, Rwanda and South Sudan subsidiaries collectively posting a 51% and 137% growth in deposits and a profit after tax respectively promising growing contribution by the regional subsidiaries going forward. 

Additionally, the bank’s strategy to grow its alternative strategic income streams was further re-affirmed with a growth of 23% being realized against the bank’s net interest income growth of 9%. Merchant business commissions posted a 69% growth while insurance, custodial and brokerage fees rose by 35%, Diaspora remittances grew by 19% and foreign exchange trading income grew by 15%.

The Bank’s agency banking network also maintained its rapid development and now has 15,875 agents representing a 70% Year on Year growth. Plans, Dr. Mwangi said, are also underway to expand the agency offering to include other services including Insurance and Air Ticket sales. Added Dr. Mwangi, “Agents are now processing more cash withdrawals and deposit transactions than the branches and ATMs combined.”

Comparatively, Equity Bank Group’s  revenues drawn from other Fees and commissions income at Kshs 6.5billion up from Kshs 5.1billion registered within the same period last year, appears to be growing faster than the Fees and commissions income on loans & advances which has been a traditional income driver for commercial banks. Further confirming the bank’s growing reputation as an economic development financier, Equity Bank’s loan book grew by 30% to Kshs 206.7billion up from Kshs 158.6billion and was supported by a 27% growth in deposits of Kshs 243Billion up from Kshs 192Billion and a 38% growth in long-term debt to Kshs 34Billion up from Kshs 24Billion.

The Bank achieved a notable improvement in the quality of the loan book with a reduction of cost of risk from 2.7% to 0.6% resulting in reduction of provisions for bad debts from Kshs 2.4 billion to Kshs 900 million while at the same time enhancing NPL coverage from 52% to 62%.  The quality of the loan book improved significantly reducing the ratio of non-performing loans from 5.5% to 4.3%.

The Bank’s total operating income rose by 14% to close at Kshs 34.5Billion up from Kshs 30.2Billion posted in the same period last year while total expenses marginally grew by 6% from 17.7Billion to stand at Kshs 18.8Billion resulting in profit before tax growth of 25% to Kshs 15.9 billion up from Kshs 12.6 billion. Return on Equity improved to 27.6% up from 26.4 % while return on assets increased from 4.9% from 4.6% for the same period last year. Despite a reduction of 30% in lending rates, net interest margin declined marginally due to sustained cost of funds. The decline on interest yield saw income cost ratio deteriorate slightly from 46% to 48%.

Speaking when he released the bank’s 3^rd quarter results, Dr. Mwangi acknowledged that the current growth comes hot on the heels of a rapid expansion of East African economies as witnessed by the recent rebasing of Kenya’s GDP which reflected a 25% expansion of the economy. The sustained 6-8% growth rate of Tanzania, Rwanda and Uganda over the recent past boosted the performance of the regional banking subsidiaries.

“Recent Vision 2030 infrastructure investment in energy, roads, ports, airports, railways and revival of manufacturing and construction sector will offer enormous banking opportunities going forward,” an optimistic Dr. Mwangi said. Dr Mwangi also observed that the changing global perception about Kenya and rebranding of the East Africa as an oil rich region and relocation of global brands’ Africa head offices to Nairobi together with the upgrade of the UNEP office into a Class 1 status UN Office will enhance business attractiveness of the region.

Dr. Mwangi acknowledged that the current growth comes hot on the heels of the recent launch of American Express products in Kenya as part of the bank’s Equity 3.0 corporate growth strategy announced early this year.

The partnership with American Express will facilitate Equity Bank to serve American Express Card Members from any part of the world visiting East Africa. Currently, American Express holds more than 107.2million cards worldwide with US$ 33Billion annual revenues.

“With the recent launch of American Express products locally, Equity Bank is now firmly entrenched as the bank with the widest international payments partnerships and ecosystem in Sub Sahara Africa,” Dr. Mwangi said. “Indeed, we are now a preferred partner for American Express, Visa, PayPal, Google and Union Pay, SWIFT, JCB, VFX, Diners Club and MasterCard,” he added.

“The strong financial performance that Equity Group has experienced throughout 2014 is an encouraging indicator that the Equity 3.0 strategy is off to a good start with a clear chance of growing our revenues further once the complementary business drivers such as our MVNO operations are commercially launched,” said Dr. Mwangi.

As part of the Equity 3.0 Strategy, the Bank plans to enhance its payment systems significantly on all fronts including mobile based platforms.