Equity Bank half year net profit hits Ksh.12 billion


Equity Bank headquaters
Equity Bank headquaters

In Summary

  • While banks have shied away from lending to the private sector on the back of holds to the interest charged on commercial loans and the subsequent attractiveness of government securities, the group has in six months pushed more funds to households and businesses.
  • The milestone is without compromising on its asset quality as the lender’s share of Non-Performing Loans (NPLs) remain stable at 8.6 percent during the half year period against a 12.7 percent industry average.
  • The lender which marks its 35th year of existence later this year expect to squeeze out more sap from its cost optimization structure to drive up the return on asset and equity investing in the second half of the year.

Equity Group has announced a nine percent increase in net profit for the first six months of 2019 to Ksh.12 billion.

The lender’s notable surge in earnings over the period is attributable partly to a rise in loan advancement to the private sector and a significant squeeze on operational efficiencies including cost optimization through the heightened digitization of transactions.

While banks have shied away from lending to the private sector on the back of holds to the interest charged on commercial loans and the subsequent attractiveness of government securities, Equity Group has in six months pushed more funds to households and businesses.

This to make a greater killing from private sector lending in comparison to Treasury returns, breaking a three-year trend defined by the Group’s accumulation of funds in government debt.

At the same-time, the bank has achieved the milestone without compromising on its asset quality as the lender’s share of Non-Performing Loans (NPLs) remain stable at 8.6 percent during the half year period when compared to the greater average industry charge of bad loans over the same period estimated at 12.7 percent.

According to Equity Group Managing Director James Mwangi, the fete has been achieved behind falling treasury yields even as the bank finds an effective policy to extend credit to households and businesses without on-boarding additional risks.

“Like a hunter who learns how to shoot without missing, we have learnt to fly without perching,” he said.

“It is the market forces that have driven the decision to pack more funds in the private sector. You wouldn’t compare a near 13 percent return on loans against an eight percent earning rate from treasury bills.”

Equity’s yield on loans was up by 12.1 percent to Ksh.18.7 billion over the period having pushed an additional sum of Ksh.45 billion in loans against a falling treasury return curve of 10 percent.

The traction of the digitization in the first six months of the year has seen the lender slash its brick and mortar transactions to a mere three percent as the installed digital innovations scooped the majority 332 million transaction deals in the period.

Further, the bank has managed to hold growth in its mobilization of funds to see its deposit pool grow by 16 percent to Ksh.458.6 billion.

The squeeze on efficiency has resulted in a cool-down in the rise of total costs as the group’s cost to income ratio holds below 53 percent with its Kenyan unit witnessing the greatest optimization among its other subsidiaries with a cost to income ratio of 46.6 percent.

Moreover, the group has maintained agility in its now Ksh.638.7 valued balance sheet highlighted by a solid 56.5 liquidity ratio.

The lender which marks its 35th year of existence later this year expect to squeeze out more sap from its cost optimization structure to drive up the return on asset and equity investing in the second half of the year.

The cost effective structure has been underpinned on the deployment of 3rd party infrastructure replacing fixed banking costs with the flexible variable options in addition to minimal investments.

Equity Group will ramp up the squeeze on efficiency later in September as its agents commence brokerage activities to small and medium enterprises (SMEs) to include the issuance of loans and the trading of bank-assurance and securities.

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Story By Kepha Muiruri
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