In the face of persistent macroeconomic challenges, including high interest rates and volatile exchange rates across the regions it operates in, Equity Group Holdings Plc (EGH) has once again demonstrated its resilience. The Group reported a 6% growth in its balance sheet, surpassing the prevailing inflation rate of 4%, bringing its total assets to Kshs.1.75 trillion as of June 30, 2024. Notably, the Group’s regional subsidiaries contributed 49.7% to this asset base.
Equity Group, recognized as Africa’s top financial brand and the second strongest banking brand globally, continues to expand its footprint, driven by its motto of “Growing Together in Trust.” The Group’s deposit franchise grew by 11% year-on-year, reaching Kshs.1.3 trillion, with its customer base now standing at 20.7 million. This surge in deposits resulted in a 55% increase in cash and cash equivalents to Kshs.341 billion, alongside a growth in investment securities to Kshs.459 billion, positioning the Group with a robust liquidity ratio of 57%.
During the release of the half-year results, Dr. James Mwangi, the Managing Director and CEO of Equity Group Holdings, expressed optimism about the Group’s liquidity, stating, “We are optimistic that the strong liquidity of the Group has positioned us to effectively support our customers as the economy shows signs of improvement in key markets. With the improved liquidity, the Group continued to optimize its balance sheet by reducing leverage by Kshs.75 billion of expensive borrowings.”
The Group’s shareholders’ funds grew by 13% to Kshs.220 billion, reinforcing its ability to support the private sector-led Africa Resilience and Recovery Plan (ARRP). This growth also positions Equity well to seize market opportunities, similar to its 2023 acquisition in Rwanda.
Despite the challenging economic environment, Equity Group recorded a robust top-line growth, with interest income increasing by 22% to Kshs.84.8 billion, up from Kshs.69.8 billion. The high inflation and interest shocks led to a 30% rise in interest expenses, totaling Kshs.30.4 billion. Non-funded income also grew steadily, contributing to a total income growth of 16% to Kshs.95.1 billion, compared to Kshs.82.1 billion year-on-year.
Equity Group’s strategy of regional and product diversification continues to yield positive results, with the Kenyan banking subsidiary now contributing 43% of revenue, down from 46% in the previous period. As the business expands in the Democratic Republic of Congo (DRC) and with synergies realized from the Cogebanque acquisition in Rwanda, the subsidiaries now account for 47% of total loans and contribute 51% of profit after tax.
In response to the turbulent global macroeconomic environment, the Group maintained a defensive and conservative approach, increasing loan loss provisions by 35% to Kshs.8.5 billion. This prudence has kept the NPL coverage ratio at 70%, with a Non-Performing Loans (NPL) ratio of 12.9%, well below the industry’s latest average of 16.3%. The Group’s continued investment in modernizing its infrastructure, coupled with high inflation, has led to a 27% increase in expenses.
Equity Group reported a half-year Profit after Tax of Kshs.29.6 billion, representing a 12% year-on-year growth, with earnings per share rising to Kshs.7.6 from Kshs.6.7. Regional subsidiaries contributed 50.2% of the profit before tax for the period. The Group’s capital buffers remain strong, with a core capital ratio of 15.8% and a total capital ratio of 18.4%, both comfortably above the regulatory thresholds of 10.5% and 14.5%, respectively.
“We are proud that the Group has sufficient cushion on its key balance sheet buffers, including liquidity, capital, and NPL coverage, while continuing to report above-industry profitability metrics with a return on average equity of 26.7% and a return on average assets of 3.4%,” added Dr. Mwangi.
Having disrupted and transformed the banking industry, Equity Group has identified insurance as a critical sector to enhance business and individual resilience. The Group recently obtained a general insurance license, complementing its existing life assurance license. This enables Equity to offer comprehensive financial services to corporate, SME, and retail customers, addressing their insurance needs by protecting life, health, and wealth through a diverse product portfolio.
Equity Group’s extensive branch network, coupled with over 1.1 million agents and merchants, continues to be integral to its insurance distribution strategy, ensuring easy access and service for customers. By June 2024, the Group had issued over 12 million life policies and served 1.5 million unique customers with life assurance and pension products.
Equity Group’s transformation extends beyond regional and product diversification, embracing a technology-led business model under the “One Equity” offering. This model prioritizes self-service and convenience, with digital channels handling 84% of transactions. Agency channels account for 9%, while ATMs and Merchant acquiring each handle 2% of transactions, leaving branches with just 3%.
The Group has built an iconic brand, ranked as one of the most valuable on the Nairobi Securities Exchange (NSE) and Africa’s top banking brand. Equity’s impact in climate action has been recognized by the International Finance Corporation (IFC), which acknowledged Equity for having the highest number of climate finance-eligible transactions, particularly in agriculture.
On August 8, 2024, Equity Group commissioned 113 Equity Leaders Program (ELP) scholars from Kenya, Rwanda, Uganda, and DRC, who received full scholarships worth Kshs.2.8 billion to pursue their university education globally. Among these scholars, 13 were admitted to Ivy League universities, bringing the total number of Equity Leaders Program Scholars at Ivy Leagues to 204. Overall, 970 scholars have attended global universities through this program.
In response to the challenging macroeconomic environment, Equity Group Foundation has provided customized capacity-building programs to 570,006 Micro and Small Enterprises (MSMEs), with a total of Kshs.355.4 billion disbursed to 305,771 MSMEs under the Young Africa Works Program, creating at least 1.3 million jobs for young people.
Dr. Mwangi concluded, “Despite the challenging environment, Equity has chosen to operate in a sustainable manner. In the coming weeks, the Group will release its third sustainability report, highlighting our approach to embedding sustainability in our strategy. We have achieved 29.5 million trees planted, and the Group continues to lead in climate finance, having extended over Kshs.26 billion (USD 200 million) in climate finance.”
