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Equity Group Holdings Registers Strong Recovery in Q1 2024

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After reporting a 5% decline in profit after tax for the year ended 31 st December 2023, Equity Group Holdings has bounced back recording strong 1 st quarter results.

Profit after tax for the period ended 31 st March 2024 grew by 25% to a record Kshs.16 billion compared to a similar period last year. Differentiated strong leadership decision making, and an agile balance sheet drove the swift recovery. Bold decisive actions saw growth in deposits placements to 11% compared to the deposits growth of 29% registered for the year ended 31 st December 2023, as the Group skipped expensive deposits. Growth in long-term borrowed funds saw a decline of 21% year on year for the period ended 31 st March 2024 as the Group paid out maturing repriced expensive dollar denominated loans.

Given the elevated credit risk characterized by high non-performing loans environment, the Group enhanced credit risk underwriting resulting to a 3% year on year growth in loan book as at 31 st March 2024 compared to a 26% growth rate for the year ended 31 st December 2023. This also led to re-allocation of lending from private sector credit to public sector lending through government securities, which grew to 21%. Consequently, the cost of credit risk dropped to 2.9% for the period to 31 st March 2024 from 4.4% for the year ended 31 st December 2023.

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The loan to deposit ratio stood at 63% as at 31 st March 2024 compared to 65.3% as at 31 st December 2023.
There was slow customer deposits growth and decline in long-term loans yielding a lower year on year growth of interest expense for the reporting period to 31 st March 2024 to 41% compared to 53% for the year ended 31 st December 2023.

Interest income for the period to 31 st March 2024 grew to 33% compared to 30% for the year ended 31 st December 2023. Growth of net interest income accelerated to 28% for the period ended 31 st March 2024 compared to 21% for the year ended 31 st December 2023. Provisions grew to 84% for the period ended 31 st March 2024 compared to the 139% for the year ended 31 st December 2023.

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NPL coverage as at 31 st March 2024 reporting improved to 68.5% compared to 67.3% reported on 31 st December 2023.
reportedly, Through the company’s efficiency pursuits at the operational level, growth in total costs declined from 52% for the year to 31 st December 2023 to a growth of 28% for the period to 31 st March 2024. This decline in total costs effectively improved cost to income ratio for the period to 31 st March to 47.1% down from 52.3% for the period to 31 st December 2023. In addition, digitization and automation of processes has significantly enhanced convenience and ease to customers in self- serving using own devices and 3 rd party infrastructure which has shifted the cost structure of the Group from fixed cost to variable costs.

While releasing the results Dr James Mwangi, Equity Group Managing Director and CEO said, “The recovery momentum is strong after accepting and adapting to the new normal of operating in an environment characterized by Volatility, Uncertainty, Complexity and Ambiguity – VUCA.An environment defined by high inflation, interest rates and volatile currency exchange rates.”

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As deliberate decisions and actions stabilize the internal operating environment while adjusting strategic intents to new scenarios of the new normal, the external operating environment continued to experience volatile, complex, uncertain, and ambiguous macro-economic turbulence of extreme volatility in currency exchange rates and high interest rates and inflation.
The resultant business shocks saw balance sheet growth slow down to 10% compared to 26% registered for the year ending 31 st December 2023. Loan uptake year on year to 31 st March 2024 grew at 3% compared to a growth of 26% for the period to 31 st December 2023.

Customer deposits growth matched the decline on balance sheet growth to record 11% compared to 29%
growth to 31 st December 2023. Early signs of calmness in the global macro environment are visible with declining inflation, peaking of interest rates and early signals of green shoots. At the domestic front, inflation has started to decline, interest rates have peaked, exchange rate volatility has reduced, and the East and Central African region shows signs of renewed growth.

The Group’s mark to market losses have reduced to Kshs 48.4 billion from a high of Kshs 78 billion in 3 rd quarter of 2023. The strong defensive strategy anchored on strong governance, leadership and strong values-based organization culture that emphasizes execution and performance, effective and efficient systems, processes and procedures, and a strong customer-centric value proposition of affordability and high-quality products and services delivered with
ease and simplicity underpins the recovery and turnaround.

Equity Group’s strategy to evolve with the needs of its customers and the economies it helps to connect and integrate has led to business diversification beyond financial inclusion by diversifying offering and moving up the value chain as it scales and connects fragmented supply chains and trade routes. As a result of business and product diversification, non-funded income contributed 43.9% of the total income of Kshs.49.6 billion at Kshs.21.8 billion. Treasury contributed 30% of all gross income of Kshs 64.8 billion at Kshs.19.6 billion while Trade Finance revenue grew at 22% to Kshs. 3.1 billion whilst off balance sheet Trade Finance facilitation grew by 23% to Kshs.205.6 billion.

The new life insurance business took a strong start with robust growth in its second year of operations. Profit after tax grew 106% to Kshs.321 million while total insurance assets grew by 288% to close at Kshs.20.8 billion while return on average Equity grew 25% to 54% up from 43% whilst posting a positive Insurance Service Result, indicative of strong underwriting practices.

This confirms that there is a significant opportunity in insurance by providing relevant, innovative and technology driven solutions to the underserved.

Also, the Equity brand has become synonymous with financial services, banking and insurance, education through Wings to Fly scholarships and the Equity Leaders Program, championing access in health through Equity Afia Medical Centers, Agriculture through Kilimo Biashara program, entrepreneurship through Young Africa Works Program and sustainability through social safety net cash payments programs, tree planting and clean energy transitions.

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Val Lukhanyu
Val Lukhanyu
I cover technology news, startups, business and gadget reviews

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