Regional banking giant, Equity Bank has continued to defy macro-economic turbulence to deliver strong growth, with profits before tax increasing by 36% to Kshs.17.4 billion up from Kshs.12.8 billion realized the previous year.
The Group’s total assets posted a 24% growth during the year to close at Kshs.243 billion up from Kshs.196 billion. Net customer loans reached Kshs.136 billion up by 19% from Kshs.114 billion. Investment in Government Securities grew by 35% to Kshs.40.8 billion up from Kshs.30.2 billion while cash and bank placements grew by 28% to Kshs. 45 billion up from Kshs.35.3 billion.
The growth in assets was mainly funded by a 16% growth in customer deposits to Kshs.167.9 billion up from Kshs.144.2 billion. Shareholders’ funds and borrowed funds which grew by 25% and 80% respectively.
Total income grew by 28% to Kshs.36.8 billion up from Kshs.28.67 billion while total operating expenses grew by 22% to Kshs.19.58 billion up from Kshs.15.98 billion. The growth in income was driven by a 19% growth in loans from Kshs.114 billion to Kshs.136 billion and 35% growth in investment in Government Securities resulting in growth of 48% in net interest income from 16 billion to Kshs.24 billion.
Strategic growth of SME lending not only resulted in rapid growth in loan book but sustained quality loan book despite the macro-economic environment. The group maintained a gross non performing portfolio of 3.1% with a coverage ratio of 78%, some of best measures in the regional banking industry. Continued strategic focus on agency banking, mobile banking, and regional expansion started to bear fruits with the cost income ratio for the group coming down from 50% to 49%.
The strategic unique funding structure of strong savings deposits, strong shareholders’ funds and long-term low cost debt helped to enhance net interest margin by 1% through-out the year.
The strong financial position enabled the Group to increase its divided pay out by 25% to Kshs.1.25 per share up from Kshs.1.00 per share or Kshs.4.6 billion up from Kshs.3.7 billion
Commenting on the results during an investor briefing, Equity Bank Group Chief Executive Officer and Managing Director, Dr. James Mwangi said the performance reflected the continuing success of the Group’s long term strategic growth initiatives.
“The Group’s strong and liquid balance sheet characterized by a high asset quality portfolio, strong liquid asset position, loan to deposit ratio of 81% and a liquidity of 46% allowed the Group to continue its strategic growth pursuit despite the increased uncertainty in the turbulent macro-economic environment,” said Dr. Mwangi.
“Despite the difficult prevailing market conditions, the Group’s commitment to its long-term strategy has enabled us to capture emerging growth opportunities in Kenya and the region,” said Dr. Mwangi.
Dr. Mwangi said the growth momentum will be sustained through maintaining an efficient operating structure, robust agency network and mobile banking, focus on SME to embed client graduation process, leveraging on technology, prudent lending and risk management.
“We have continued to implement a winning strategy that focuses on delivering value to the customer, disciplined cost management and increasing productivity of the subsidiaries,” said Dr. Mwangi.
The Group plans to enhance its market share through consolidation of the regional business; rolling out electronic delivery channels and expanding agency banking in the recently established countries. The Bank has operations in Uganda, South Sudan, Rwanda and Tanzania.
The number of Equity Group agents stood at 6,344 in the year ending 2012. Transactions by agents grew by 96 percent between 2011 and 2012. Agents’ transactions accounted for 30 percent of total bank transactions.
The bank today has one of the best systems in the industry. Its core banking system has the capacity of handling 35 million accounts and currently has over 7.8 million accounts.
Lending to Small and Medium Sized enterprises (SME) increased by 45 percent to Kshs 63.69 billion
during the year. Last year, Equity Bank announced plans to increase lending to this fast growing sector. The SME sector today accounts for about 45.5 percent of the bank’s loan book.
Equity Bank’s investment in a robust IT platform continues to pay dividends as the Bank ventures into strategic partnerships with a view to becoming a one stop shop for financial services in the region
Last year, the Bank partnered with China Union Pay, which allows UnionPay card holders to make transactions from Equity Bank’s ATMs and Points of Sale Terminals across the East Africa region.
In a bid to extend financial inclusion in the East African region, Equity Bank in collaboration with MasterCard Worldwide has also introduced Mobile Point of Sale (MPOS) technology. The innovative technology will help businesses and retailers boost sales through broadened acceptance. The MasterCard MPOS solution will enable the use of mobile phones at point of sale (POS) terminals and accept electronic payments.
Equity Group Foundation which was established by Equity Bank to create the financial and operational infrastructure for social programspartnered with The MasterCard Foundation to roll out a financial literacy program that has so far trained over 500,000 youth and women out of the target 1 million beneficiaries. The Foundation in partnership with The MasterCard Foundation and with support of USAID, UKaid, and KfW among others has also awarded 8,671 scholarships to bright but needy students through the Wings To Fly Secondary School Scholarships.