Equity Bank Reports Sh41 Billion Profit Driven by Government Securities and Strong Deposit Growth

Equity Bank Group reported a 13.1 percent increase in profitability to Sh41.9 billion in the first nine months of the year, largely driven by high returns from Kenyan government bonds. The East African region’s second-largest lender by assets shifted its strategy towards government securities, investing Sh468.1 billion in government papers, representing a five percent increase compared to the same period in 2023. Meanwhile, traditional customer lending decreased by five percent to Sh800.1 billion from Sh845.9 billion year-over-year.

[ays_block_subscribe id=’1′]

Group CEO James Mwangi acknowledged that the period presented challenging operational conditions, marked by inflation and currency devaluation early in the year. In response, the bank implemented protective measures, including diversifying investments and increasing provisions against potential loan defaults. The bank set aside Sh12.7 billion for loan loss provisions, achieving an NPL coverage ratio of 67 percent and maintaining a Non-Performing Loans ratio of 13.4 percent, significantly better than the industry average of 16.7 percent.

Despite economic challenges, the bank recorded strong revenue growth, with interest income rising 13 percent to Sh125.9 billion from Sh111.1 billion. Interest expenses paid to customers increased by 18 percent to Sh45.3 billion, reflecting the high inflation and interest rate environment. Non-funded income grew by Sh2 billion, contributing to an overall income growth of eight percent to Sh138.9 billion.

The bank’s regional diversification strategy proved successful, with the Kenyan banking subsidiary’s revenue contribution decreasing to 47 percent from 52 percent previously. Regional subsidiaries now account for 51 percent of the period’s profit. The bank maintained strong capital positions, with core capital ratio at 15.9 percent and total capital ratio at 18.3 percent, both exceeding regulatory requirements.

Equity’s expansion into the Democratic Republic of Congo and its acquisition of Cogebanque in Rwanda have strengthened its regional presence. Subsidiaries now represent 47 percent of total loans, up from 46 percent in 2023, and contribute 47 percent of profit after tax. However, operating expenses increased by 19 percent due to technology infrastructure investments and high inflation.

The bank’s performance resulted in improved earnings per share, rising to Sh10.4 from Sh9.2. The Group maintains its focus on strengthening its management strategy and control environment to navigate the challenging macroeconomic and regulatory landscape while pursuing sustainable growth.

Here’s what it means for you:

1. The bank is performing well with 13.1% profit growth and earnings per share increased from Sh9.2 to Sh10.4, meaning better returns for shareholders.
2. The high NPL ratio (13.4%) indicates many businesses are struggling to repay loans, though it’s better than the industry average.
3. Bank lending has decreased by 5%, suggesting it might be harder to access business loans.
4. Regional expansion provides good diversification, reducing risk from any single market.

Source; Equity Group holdings

[/ays_block_subscribe]