Amid a global economic downturn with a global GDP growth rate projected at 2.9% for 2023, with a downside growth outlook as a result of sticky, stubborn inflation, elevated interest rates, turbulence in exchange rates, and a financial crisis, Equity Group has reported A 33% growth in a dividend payout of a record KES 15.1B.
• A record Profit Before Tax of $ 59.8B and a net Profit After Tax of $ 46.1B – a 15% Year-on-Year growth.
• A record KES 1.447 trillion balance sheet after an 11% growth in total assets.
• A record deposit base of KES 1.05 trillion customer deposits following a 10% Year- on – Year growth rate.
“The Group’s 2022 results reflect the resilience that the business has developed due to deliberate and intentional leadership and management decisions through interest capping period and COVID- 19 pandemic environment, strategically positioning the business to navigate the evolving macroeconomic headwinds and turbulence in the financial and economic sectors,” said Dr James Mwangi, Group Managing Director and CEO as he released the results.
Equity Group’s differentiated proactive strategy and thought leadership has defensively positioned the Group for the current challenging macroeconomic environment, as evidenced by a strong cash buffer with 16% of the entire balance sheet of KES 1.447 trillion being held in cash and cash equivalents of KES 232.4B.
The bank also recorded strong liquidity buffers of 52.1% and a high asset quality portfolio with a Non-Performing Portfolio (NPL) of 7.7% against an industry average of 13.3%, 94% NPL coverage and 123% inclusive of credit risk guarantees.
• Strong shareholder capital buffers of KES 182B with core capital to total risk-weighted assets of 15.6% against a minimum legal requirement of 10.5% and total capital to total risk-weighted assets of 20.2% (against the minimum legal requirement of 14.5%)
• A substantial deposit and liability franchise with a 2.3% and 3% interest cost, respectively and an 18 million customer base and a long-term debt funding of KES 157.5B.
• Capital and long-term debt totalling KES 339.7B, equivalent to 23.5% of total assets and a low loan-to-deposit ratio of 67.2%
• Strong growth momentum with non-funded income growing at 33%, net interest income at 25% and total income at 28%
• High-quality earnings with non-funded income contributing 40% or KES 58.3B of the KES 144.3B total revenue.
• Strong efficiency evidenced by a cost-income ratio of 48.4%, a return on average Equity of 27.6% and a 3.4% Return on Average Assets.
• A high digital adoption, with 97% of all transactions happening on digital platforms, on self-service customer devices and 3rd party infrastructure, offers a strong opportunity to reduce fixed costs and variable costs.
The Equity Group Profit After Tax grew by 15% to reach KES 46.1B, up from KES 40.1B, driven by a 28% growth in the total income of KES 144.3B, made up of KES 58.3B of non-funded income, which grew by 33% and net interest income of KES 86.0B which grew by 25%. A 73% growth in gross trade finance revenue underpinned by a 37% growth in trade finance guarantees and off-balance sheet items drove the growth of non-funded income. Total cost peaked at KES 84.5B after a 39% growth driven by 180% growth on loan loss provision of KES 13.7B, up from KES 4.9B to achieve 94% NPL coverage at a 2.4% cost of risk. Staff cost growth of 30% to KES 24.8B, up from KES19.1B, as the Group hired to strengthen and deepen its executive leadership and management bench while strengthening talent and fortifying organizational governance structure as a platform for takeoff.
Geographical expansion and business diversification continued to strengthen the resilience and risk mitigation of the Group. The Kenyan banking business’ dominant performance continued to decline with the strong showing of other subsidiaries, which contributed 44% of the Group’s assets and an equivalent 44% contribution to total revenue. With its strong efficiency, economies of scale, and maturity, Kenya contributed 70% or KES 33.4 billion of the Profit After Tax, leaving the other subsidiaries contributing KES14.7 billion of net profit. The time it takes for a subsidiary to reach a 4% Return on Assets has reduced from 16 years to 12 years and may reduce further as the region consolidates as the fastest-growing region in the world.
“The COVID-19 environment acted as a tailwind for business transformation through innovation and digital adoption. 97% of all Group transactions are on customer self-service on own devices driving efficiency gains, ease and convenience to customers and reduction of fixed and variable costs. The Group’s latest breakthrough is digital e-Commerce payments through Pay with Equity (PWE) rails following the wave of mobile and internet banking usage by customers,” Dr Mwangi added.
Pay With Equity transactions grew by 393% to 131.5 million transactions, while the volume of business transacted grew by 281% to KES 524B during the year. Internet banking transactions grew by 212% to 10.7 million transactions, while the value grew by 136% to KES 311B.
Given the challenging socio-economic environment, the Group stepped up its social impact investments inspired by the need to fulfil its commitment to promoting inclusion, transforming lives and livelihoods, enhancing human dignity, and expanding opportunities in society with a bias for young people and women. Over the last 4 years of COVID- 19 environment, secondary school scholarships offered by the Equity Group Foundation (EGF) and its partners have increased to 57,009 from 16,304, with over 40,000 scholars currently in school concurrently between Form 1 to Form 4. The Equity Leaders Program (ELP) has recorded 17,820 university scholars, with 761 being global scholars and 7,482 receiving paid internships. Additionally, 3,454 scholars have been fully supported to access skills training in TVET institutions. The remarkable success of Equity Group’s education and leadership development program is best reflected by student admission to leading global universities as indicated below;
The Equity Afia medical franchise prides itself on having 77 medical centres, all owned by ELP scholars who have graduated from university with medical degrees. The franchise now employs 1,716 medical staff in the 77 medical centres, has cumulatively recorded 1,299,523 patient visits, and has established a reputation of quality and affordability through its high volume, low margin model. The proof of commercial viability of the franchise has paved the way for rapid expansion plans to reach 300 medical centres by 2025.
Equity’s deliberate focus to offer and create opportunities for women and youth has seen 2,404,400 previously excluded women and youth receive financial literacy training and education. In the last 3 years, 406,621 Micro-, Small and Medium Enterprises (MSMEs) have received training in entrepreneurship and funding to the tune of KES 223.1B and have created 1,266,182 jobs through the Young Africa Works program. Under the agricultural programs, 3.9 million farmers have been impacted to transform into agribusinesses while 215,512 small and medium-sized farmers have been reached, mobilized and connected to value chains.
The Group continues to seek to do well while doing good, serving and supporting 4.5 million households under social protection programs aimed at moving them away from reliance to self-sustenance. Bank branches have been opened in all significant Kakuma, Kalobeyei, Dadaab and Gulu refugee camps to integrate refugees and host communities through financing and economic and commercial activities. A sponsorship towards famine relief worth KES 120 million has been extended to the National drought relief efforts for 4.5 million people adversely affected and exposed. Additionally, the Group has funded planting 21.8 million trees as part of the ongoing commitment to plant 35 million trees. A total of 375,683 clean energy products have been availed to households to ensure access to and use of clean energy for cooking and lighting. A program has been launched to support schools, hospitals and universities to replace their wood-fuel cooking that promotes cutting trees with LPG cooking equipment as a transition pathway to cleaner energy. When fully implemented, the initiative will see 12 million trees saved from being cut for firewood purposes per year.
While commenting on the future outlook, Dr Mwangi said, “while the Group’s offensive strategy has helped double the size of the balance sheet and increase its market share by 60% over the last 3 years of COVID-19 environment, the defensive aspects of the strategy have strongly positioned the Group to wither the prevailing challenging macroeconomic environment resulting from the evolution of COVID- 19 health pandemic into an economic crisis resulting from disruption of global supply chains and the current macroeconomic headwinds of a stubborn, and sticky inflation, elevated interest rates and turbulence of exchange rates and currency devaluations which have combined to a global perfect financial storm.
The follow through and consistent execution of a delicately balanced offensive and defensive strategy has supported the evolution of the Group into a regional systemic financial services provider ranked the world’s 4th strongest financial brand with a brand value of KES 69B,” added Dr Mwangi.’