Equity Group net profit for the half year ended June 2024 grew 12.1 percent to Sh28.54 billion on increased interest and non-interest income, boosted by growth in regional businesses.
Net interest income grew by 17.2 percent to Sh54.4 billion while non-interest income rose by a similar margin to Sh42.78 billion.
Equity Group CEO James Mwangi said on Monday the regional subsidiaries did the heavy lifting for the group, given that Equity Bank Kenya, the largest subsidiary, returned a 10.8 percent decline in net profit to Sh13.59 billion.
Regional subsidiaries continued to support growth, with a combined profit after tax growing by 50 percent to Sh13.7 billion. The amount is equivalent to 48 percent of the group’s net earnings.
Net profit in Equity’s most profitable subsidiary, Equity BCDC, rose by 19 percent to Sh7.4 billion. Mr Mwangi said he expects the growth momentum to be maintained in the second half of the year, leading into another year of dividends.
“This [performance] is a promise to shareholders that the dividend seems assured this year, with earnings growing at 12 percent,” said Mr Mwangi.
The group’s loan book shrunk by 3.2 percent to Sh791.12 billion, partly on reduced appetite for borrowing and the revaluation of the dollar-denominated loans as the shilling gained ground against the US dollar.
In Kenya, where about 53 percent of the loan book is denominated in dollars compared to less than 30 percent in the group, loans and advances fell by 7.9 per cent or Sh36.4 billion to Sh423 billion.
“We are confident that we will reverse the trend of declining loan books because of customers holding back… Customers were deferring borrowing decisions because of the high interest rates,” said Mr Mwangi.
He added that the Kenyan unit will soon announce a reduction in loan rates in the region of 0.4 percentage points to reflect the 0.25 percentage points cut on the central bank rate that the Central Bank of Kenya announced last week.
The group’s interest expense on customer deposits rose 35.5 percent to Sh21.85 billion, marking a faster pace than the 10.5 percent growth in deposits.
The mismatch reflects the pressure on banks to attract deposits in an environment of increased returns on government paper.
Equity’s non-performing loans (NPLs) ratio hit 12.9 percent from 9.5 percent, to which it reacted by increasing provisioning for loan defaults by 48.3 percent to Sh10.52 billion. Gross NPLs rose 23 percent to Sh119.9 billion.
Corporates led on defaults with an NPL ratio of 20.4 percent followed by micro, small and medium sized enterprises (12 percent).
In terms of subsidiaries, Equity Bank Uganda had the highest NPL ratio at 17.9 percent followed by Kenya (17.2 percent) and Tanzania (10.6 percent).
The increased provisioning for loan defaults, added to a 12.5 percent rise in staff costs to Sh16 billion, saw Equity’s operating expenses rise by 26 percent to Sh59.97 billion.
