Equity Group posts Ksh 17.2 Billion profits attributed to innovation & a growing customer base



Equity Group  today announced a record Kshs.17.2Billion up from Kshs.13.3Billion posted the previous year. Profit before tax grew by 18% to stand at Kshs.22.4Billion up from Kshs.19Billion.

29% growth in Profit after Tax

The Group attributed its 29% growth in Profit after Tax for the year ended December 2014 to a growing customer base which gave it a 24% growth in the balance sheet size to Kshs.345Billion up from Kshs278Billion in 2013. The Group’s customer deposits grew by 26% growth to Kshs.245.6 Billion up from KShs 194.8Billion while customer accounts grew by 1.2 Million new customers raising the customer base to 9.6 Million up from 8.4 Million customers in 2013.

Equitel Mobile

Some of this customers and transactions were also brought in by its Equitel Mobile service which reported over 400,000 sign ups doing over 5.5 million transactions in December alone.  Apart from a growing customer base, the Group also said its effective intermediation which resulted into a corresponding growth of 25% in net loans and advances to Kshs.214.2Billion up from 171.4Billion.


According to Equity Group’s CEO Dr. James Mwangi, “Time seems to be fast approaching when banks may not necessarily continue to exist as they are constituted today even though banking services will undoubtedly continue to be required. Equity Group’s innovations are informed by this reality and are geared towards supporting banking becoming something you do, as opposed to somewhere you go to transact. Our members are increasingly gaining more freedom, choice and control.”

Equity Group also recorded improved performance in all  its subsidiaries.

The Group said it saw an increase of 346% in the consolidated profit contribution from Rwanda, South Sudan, Tanzania and Uganda to Kshs.1.07Billion in the period; up from Kshs.240 Million the previous year. Deposits and net loans in the regional subsidiaries grew by 48% and 36% respectively.

Housing Finance shares disposed

The Group also spent some money to create the new non-operating holding company, ‘Equity Group Holdings Limited’ and also spun off  ‘Equity Bank Kenya Limited’as a new new subsidiary. This processes increased the Group’s cost income ratio from 48% to 52%. The group’s  non-recurring expenses of KShs 800Million were met by KShs 1.1Billion gain after the Group disposed its shares in Housing Finance.

While the loan book grew by 24%, the increase in interest income was impacted by reduction in margin spreads attributable to a combination of increasing proportions of loans to SMEs and large corporates – up from 62% in 2013 to 67% – as well as lower margin spreads of USD denominated loans whose share of the loan book increased from 18% in the previous year to 25%.

The impact of the pressure on interest income was mitigated by deliberate aggressive adjustments in the funding profile of the Bank which resulted in containing the increase in interest costs to 15% against a growth of 26% in deposits. This was largely achieved through the reduction of the proportion of term deposits in the Bank’s total funding from 18% to 13%. The average cost of funds was contained at 2.5% (2013: 2.6%).

Consequently net interest income grew by 11% against declines in yields from 14.6% to 13.9% and net interest margin from 12% to 11.4%. Dr. Mwangi observed that non-funded income over the last 3 years has increased its proportion of income from 35% to 39% demonstrating results from successful implementation of strategic initiatives on remittances, merchant banking and transaction processing diversifying the Group’s income sources while at the same time reducing income volatility associated with interest income and cyclic provision expense.

Other incomes grew by 19% driven mainly by 66% growth in merchant and payment processing commissions , a 28% growth in foreign exchange income and remittance processing fee and 25% growth on fees on loans.

Non-performing loan coverage excluding collaterals was enhanced from 72% to 88% as the non-performing loan book improved by 100 basis points from 5.2% to 4.2%.

Total capital to risk weighted assets stood at 17.3% against a statutory minimum requirement of 14.5% while core capital to risk weighted assets stood at 14.8% against a statutory minimum of 10.5% reflecting the Group’s strongly capitalization status.

The net effect of a very successful year was improvement on Return on Average Equity from 28% to 30% and Return on Assets from 5.1% to 5.5%.

Proposed dividends for the period are up 20% from Kshs.5.5Billion to Kshs.6.7Billion.

Agency network beating ATM’s & Branches

Equity Group’s agency network now has 17,523 agents who processes 43% of all customer cash transactions compared to branches and ATMs which process 33% and 24% of the transactions respectively.