Equity Group Holdings profit before tax for the nine months period to 30th September 2016 grew by 18% over the same period last year to Ksh21.5 billion, defying a gloomy banking environment that saw three banks collapse.
Net interest income grew by 26% to Ksh32.3 billion up from Kshs25.6 billion while total costs increased by 13% to Ksh27.4 billion up from Ksh24.2 billion with operating expenses growth being limited to single digit percentage growth as the benefits of the digitization process begin to show
Profit before tax in Uganda and Democratic Republic of Congo grew by 130% and 16% respectively. The positive outcomes across the subsidiaries more than offset an exceptional dilution of 84% in the balance sheet of the Group’s subsidiary in South Sudan arising from an a nearly twenty fold depreciation of the South Sudanese Pound (SSP).
Regional banking subsidiaries now contribute 30% of the group’s total deposits, 18% of the total loans and 25% of total group asset, signifying growing diversification which places the Group in good stead to sustain its growth momentum going forward.
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Dr James Mwangi, Equity Group CEO, attributed the performance to innovation and efficiency, which resulted to the Group’s cost income ratio declining from 53% to 49%. Equity Bank Kenya, which is the Group’s largest subsidiary, had its cost income ratio decline from 47% to 43%.
However, the Group recorded an increase in cost of risk from 0.95% to 1.63% and 0.75% to 1.41% for Equity Bank Kenya. The increase in provision for Equity Bank Kenya has been informed by strategic decision to recognize that loans underwritten at a higher yield have had their interest adjusted downwards.
The Bank has adopted a conservative approach to reduce future provisions in line with the reduced yields hence increasing current year’s provisions by 95% from Ksh1.7 billion to Ksh3.3 billion.
The most impactful innovation in contributing to efficiency and profitability was Equitel – the Group’s mobile banking platform which within its first full year of operation in Kenya captured 15% of the total mobile money transfer market in both value and volume of transactions. Mobile digital banking processed nearly 3.5 million loans totaling Kshs.30 billion which represented 84% of the loans granted by the bank in Kenya. The quality of the loans disbursed through the mobile digital platform during the year was excellent with a realized recovery rate of 98%.
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