Equity’s profit up 13pc as Kenya subsidiary recovers
Equity Life Assurance (Kenya) Limited Managing Director Angela Okinda (left) engages with Equity Group Managing Director Dr James Mwangi during the release of Q3 2024 Financial Results and Investor briefing held at Equity Centre in Nairobi on November 12, 2024.
Equity Group posted a 13.6 percent rise in net profit to Sh39.3 billion in the first nine months ended September 2024 as earnings in the Kenyan unit recovered and costs grew at a muted pace.
The growth in net profit was from Sh34.6 billion posted in the preceding similar period. This came on the back of its largest subsidiary—Equity Bank Kenya—growing net earnings to Sh20.6 billion.
It marked a reversal from a similar time last year when net profit retreated by 20 percent to Sh19.34 billion.
Banking businesses outside Kenya, excluding South Sudan and Uganda, also posted profit growth, taking subsidiaries’ net profit to Sh18.4 billion, compared with Sh18.5 billion in the previous period last year.
DRC Congo’s Equity BCDC, which is Equity’s most profitable unit outside Kenya, saw its net profit remain at Sh11.4 billion while that of Rwanda rose 36 percent to Sh3.8 billion.
Tanzania saw a 14 percent growth in net earnings to Sh0.8 billion as that of Uganda and South Sudan retreated by 14 percent and six percent to Sh1.8 billion and Sh0.8 billion, respectively.
The recovery of profits in Kenya took the unit’s contribution to group net earnings to 53 percent compared with the previous period’s 47 percent.
The share of subsidiaries outside Kenya to profits dropped to 47 percent from 53.5 percent.
Group net interest income grew by 10.9 percent to Sh80.59 billion while non-interest income was up 5.8 percent to Sh90.71 billion.
Operating expenses rose by 7.4 percent to Sh90.7 billion, being a muted growth compared with the previous period last year when the expenses shot up by 46 percent to Sh84.5 billion.
The contained growth in operating costs came in the period Equity cut the provisioning for non-performing loans (NPLs) by a third, or Sh6.3 billion, to Sh12.68 billion.
The group’s NPL ratio hit 13.4 percent from 12.2 percent, with the Uganda unit leading at 20.9 percent, followed by Kenya (17.7 percent) and Tanzania (11.1 percent). The defaults ratio was six percent in DRC and 4.4 percent in Rwanda.
Equity Group chief executive James Mwangi said there has been no further surge in loan defaults, giving the lender room to expand lending at an increased rate going forward.
“Our loan book has not improved, but the quantum of our NPLs has remained the same. There is no more growth [in NPLs]. We have done better than the numbers reflect because the numerator (gross NPL) is doing better than the denominator (gross loans),” said Mr Mwangi.
“We anticipate that by the end of the year, we will be in one-digit NPL position. Once we have resolved the issue of the performance of the loan book, then we can focus on the opportunity of accelerating growth by providing loans to our customers.”
Corporates continued to lead on defaults, with an NPL ratio of 22.5 percent, followed by micro, small, and medium-sized enterprises (14.2 percent) and retail at six percent.
