Equity Group Holdings Plc has released its first-quarter results which reflect the assessment the Group places in the uncertainty created by COVID-19.
Profit before provisions was up by 10% to Kshs.10 billion from Ksh9.1 billion the previous year.
However, the Group increased its loan loss provision tenfold to Kshs3 billion from Ksh300 million the previous year leading to a decline of profit after tax by 14% from Ksh6.2 billion to 5.3 billion for the same period last year.
Equity Managing Director and CEO Dr. James Mwangi while releasing the results said, “The global COVID-19 pandemic has mutated into a global economic crisis, occasioned by a sudden standstill of economic activity as a result of the global lockdown. This has introduced unprecedented uncertainty within the global financial systems prompting us to adopt a conservative approach – fortifying our balance sheet and assuring ample liquidity to support our customers.”
The Group continued to enjoy robust growth with total assets registering a 14% year on year growth to Ksh693.2 billion from Ksh605.7 billion driven by a 17% growth in customer deposits to Ksh499.3 billion from Ksh428.5 billion.
The Group’s total income grew by 13% to Ksh19.7 billion up from Kshs. 17.5 billion for the same period last year.
Equity continues to register impressive progress in transforming itself from the place you go to something you do on devices. The brick and mortar infrastructure of branches and ATMs processed only 6% of the Group’s banking transactions, while mobile and internet banking processed 79% of all transactions, with agents and merchants processing 15% of transactions making the Group an increasingly virtual digital financial service provider.
The Group’s regional and diversification subsidiaries continued to register impressive results with a return on equity of 18.7% against the Kenyan banking subsidiary return on equity of 21.6%. The subsidiaries increased their total revenue contribution to the Group’s revenue to 30% up from 28% the previous year, while raising their contribution of profit before tax to 26% of the Group’s profit up from 17%.
Equity stands well positioned to confront the challenges of the COVID-19 disruption that is mutating into an economic, financial, and humanitarian crisis. The Group’s business model of high-volume low margins with non-funded income contributing 42% of total income and a low cost of funding of 2.8%, allows the Group to ride a compression of margin in interest-earning assets. A well-diversified and distributed portfolio of Equity’s loan book across sectors of the economy and segments of clients helps to mitigate loan quality shocks.
A strong Group liquidity position of 51.6% and strong total capital to risk-weighted asset buffer of 19.5% against a low loan to total assets ratio of 55% places the Group in a strong position to adequately handle the economic and financial challenges of the COVID-19 global health pandemic.
Earlier the Board of Directors withdrew its recommendation of a Ksh9.5 billion dividends payout to its shareholders for the 2019 financial year.
Dr. Mwangi said “A strong capital and liquidity position gives us the strength and capacity to cushion our business against external shocks and accommodate and walk with our customers during these challenging times,”
He added that Equity has restructured customers’ loans of up to Ksh92 billion for up to three years as an economic relief effort to the COVID-19 crisis.
“We will walk with our clients through this crisis and will give every client a chance to turn the crisis into an opportunity to thrive. Equity Group will deploy its capital strength, balance sheet agility and liquidity to support a long-term view,” said Dr. Mwangi.
The Group continues to make social and impact investments to support society and build brand love under a shared prosperity business model.
To date, the Group together with its development partners has invested US $433 million in education scholarships, agriculture transformation, health, energy, leadership development, and business services along with capacity development for micro, small and medium enterprises, and entrepreneurs.
“A strong corporate brand, an agile liquid balance sheet, a well-segmented and diversified asset portfolio and a well-balanced risk management policy places the Group strongly to weather market challenges, support our customers not only to survive but to recover and thrive, emerging from this crisis stronger,” said Dr. Mwangi as he released the first quarter of 2020 financial performance results.