Equity Group MD and CEO Dr James Mwangi.

Equity Bank Group defied a challenging operating environment over the last two years to  report a 14% growth in profit after tax for the year ended December 2017 to Ksh 18.9 billion up from Ksh 16.6 billion in 2016.

The operating environment over this two-year period was characterised by bank failures, severe drought adversely impacting the agricultural sector and resulting in elevated inflation, prolonged presidential elections, interest rate capping causing a credit crunch and ultimately lower economic growth estimated to be 4.7% in 2017 from 5.8% in 2016.

The lender says a fortified liquid and agile balance sheet positioned it defensively in the challenging and uncertain operating environment whilst diversified revenue streams, geographic diversification and structural efficiency gains enabled the Group to weather the effects of interest rates capping.

The Group now has a liquidity ratio of 54%, non-funded income contributes 42%, subsidiaries contribute 14% of earnings and costs have only grown 7% over the past 2 years. Key in management strategy has been innovation and digitisation of the Group which is now being rolled out to the subsidiaries consolidating efficiency gains.

Equity Group reported differentiated revenue growth of 2% to Ksh 65.2 billion up from Ksh 64 billion, despite the impact interest rate caps and the challenging operating environment has had on the banking sector. Non-funded income continues to be a key differentiator and grew by 24% to Ksh 27.6 billion up from Ksh 22.2 billion year on year driven by forex income, remittances, commissions, trade finance, agency commission, Amex credit cards and diaspora remittances.

“Equity Group business model has proven that the Group is not dependent on the loan book only to drive shareholder value,” Dr Mwangi said and added that “We are reaping the benefits of a strong social brand that focuses on enhancing our relationship with the community through a shared prosperity approach to business.  This, coupled with a staff force that is talented, passionate, and committed to our shared vision of transforming the lives and livelihoods of our people gave the Group a strong foundation to confront and defy a perfect storm.”

In 2017, the Group crystallised its 3.0 Strategy of digitization through its digital suite of self-service tools known as Eazzy Banking. This saw an exponential growth of customer activity in third-party channels which now contribute over 94% of transaction volumes with recently rolled out Eazzy Banking App growing by 2,005% to 92.8 million transactions from 4.4 million Year on Year (YoY) and a value of Ksh 77.8 billion from Ksh 3.3 billion YoY. Eazzy Biz, which is a cash management solution for SMEs had a rapid adoption in the market that resulted in a growth of 516% YoY with a transaction value of Ksh 139 billion from Ksh 48.8 billion YoY.

“Our prediction that the branch will cease to be a banking transactional channel has come to pass. Our branches reported a decrease in transaction volumes by 9% to 18.6 Million down from 20.4 Million but with an increase in transaction value to Kshs 1.46 trillion from Kshs 1.44 trillion YoY. This is in line with our strategy of re-inventing the branches as relationship and wealth management centres for our SMEs and high net worth individuals since transactions have moved to self- service channels,” Dr Mwangi observed.

Equitel continued to increase market share with transaction volumes growing by 11% to 251.6 million from 227.4 million YoY while the value of transactions grew by 32% to Ksh 480.3 billion up from Ksh 364.4 billion.

The Group’s agency network which has now grown to reach over 35,000 agents saw the transaction volume grow by 7% to 66.2 million from 61.9 million with value growing by 15% to Ksh 528.9 billion from Ksh 458.3 billion.

Diaspora remittances grew by 132% to Ksh 30 billion from Kshs 13 Bn YoY due to an increased strategic partnership with payment partners including PayPal, Equity Direct, Western Union, MoneyGram, Wave and Swift.

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Income from Treasury Operations increased by 59% to Ksh 19.2 billion from Ksh 12 billion YoY driven by an increase in government securities portfolio to Ksh 128 billion from Ksh 100.6 billion and increasing its contribution to the total income by 25%.

The Group’s strategy of regional and business diversification resulted in a double-digit growth across the subsidiaries with an increased contribution of PBT of 14% from 8% YoY, validating the Group’s decision to diversify into the East and Central Africa region and diversification in financial services offering. Uganda PBT grew by 88%, Rwanda by 76%, DRC by 55%, South Sudan by 107%, Finserve by 29% and EIB by 48%.

 

 

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