Equity Group Holdings has proposed a record dividend of Kshs.15.1 billion for a second year running.
While releasing the 2023 full-year financial results Dr James Mwangi, Group Managing Director and CEO said. “The Kshs. 4 per share dividend amounts to a 36% payout of the Kshs.43.7 billion Profit After Tax or Kshs 11.1 earnings per share and dividend yield of 11.9% on the 2023 year-end closing share price of Kshs.33.65 or 800% on par value.”
The performance reflected strong momentum as net interest income grew by 21% to Kshs.104.2 billion up from Kshs.86 billion while non-funded income registered an impressive 30% growth to Kshs.75.9 billion up from Kshs 58.3 billion.
Gross trade finance revenue grew by 90% to Kshs.11 billion from Kshs 5.8 billion driven by a 106% growth of trade finance-related lending and 26% growth of trade finance guarantees and off-balance sheet items.
Total costs grew by 52% to Kshs.128.2 billion up from Kshs 84.5 principally driven by a 139% growth in loan loss provision of Kshs 32.8 billion up from Kshs.13.7 billion to strengthen asset quality buffers.
Other operating expenses and staff costs grew by 39% and 28% respectively driven by high inflation and depreciation of the Kenya shilling.
Return on average equity stood at 22.3% against an 18% cost of capital. Profit After Tax declined by 5% to Ksh 43.7 billion down from Ksh 46.1 billion as a result of interest expense growing at 53% compared to a 30% growth rate of interest income.
Gross balance sheet grew by 26% to Kshs.1.821 trillion up from Kshs 1.447 trillion driven by 29% growth in customer deposits to Kshs 1.358 trillion from Kshs 1.052 trillion. Shareholders’ funds grew by 20% to Kshs.218.1 billion up from Kshs 182.2 billion.
Deployment of funding saw net loans grow by 26% to Kshs.887.4 billion up from Kshs.706.6 billion while government securities holding grew by 27% to Kshs.500.5 billion up from Kshs.394 billion as cash and cash equivalent grew by 25% to Kshs.290.1 billion up from Kshs 232.4 billion.
Equity Group resilience
The Group business has demonstrated resilience after multiple shocks, interest capping, the COVID-19 global health pandemic, global supply chain disruptions, the Russia/Ukraine war and global macro-economic headwinds exemplified by FX volatility, high inflation and high interest rates over the last 7 consecutive years.
During this turbulent period the number of customers has grown to 19.6 million up from 10.4 million, customer deposits have grown to Kshs.1.358 trillion up from Kshs.303.2 billion while the loan book has grown to Kshs.887.4 billion up from Kshs.269.9 billion.
Total assets have grown to Kshs.1.822 trillion up from Kshs.428.1 billion as shareholders’ funds grew to Kshs.218.1 billion up from Kshs. 72.1 billion.
Over the last unprecedented 7 years of turbulence, the Group has treaded softly yet boldly pursuing the twin strategy of being offensive while remaining defensive.
The Group has intensified and strengthened its risk management governance framework and a value-based organizational culture that emphasizes human interactions and attitudes, norms and practices that drive an innovative, customer-centric approach, strong compliance and a prudent risk management culture.
The Group registered a PAR of 11.7%, a slight improvement from 12.2% at the end of the 3rd quarter and favourably compared with 14.8% industry NPLs.
Dr Mwangi pointed out, “The NPL trend is consistent with management’s view as at the investors’ 3rd quarter briefing that NPLs had peaked. Prudent risk management culture led the board to approve a proactive derisking of future performance by providing for the lifetime expected loss on outstanding NPLs and increasing loan loss provision by 139% to Kshs.32.8 from Kshs.13.7 billion driving cost of risk to 4.4% while increasing NPL coverage to 67.3% without guarantees and 90% with guarantees.”
Deep purpose, a consistently strong risk management culture and a vibrant value-based organization culture have supported the evolution and development of the Group brand to achieve recognition and accolades such as the Oslo Business for Peace Award as well as the 2nd Strongest Global Banking brand by Brand Finance.
Green financing loans
IFC, the Private sector arm of the World Bank has recognized Equity as the bank with the highest number of green financing loans for climate mitigation and adaptation worldwide.
The defensive strategy adopted by the Group has seen it register strong risk buffers of 53.4% liquidity, relatively strong asset quality with strong NPL coverage and strong capital buffers.
The total capital-to-risk weighted asset ratio of 18.1% reflects a buffer of 3.6% above the minimum capital requirement of 14.5% while the core capital-to-risk weighted asset ratio stood at 14.3%, a buffer of 3.8% above the regulatory requirement of 10.5%.
The Group is well-capitalized and strategically positioned for its offensive growth strategy. An environmental scan positions East Africa as one of the fastest-growing regions in the world.
The region accounts for the highest number of countries in Africa with a GDP above 5%, is the second largest recipient of FDR flows in Africa after North Africa and stands out as a key destination of global remittances. The East Africa region has a thriving ecosystem of trade interconnectedness driven by strong regional integration and robust infrastructure.
Upside opportunity in East Africa
There is a significant upside opportunity in East Africa with Tanzania, Uganda and Rwanda being the twenty fastest growing countries in the world. More than 63% of the region’s population is below the age of 24 years while the median age is below 19 years.
DRC holds significant strategic green mineral deposits. This environment uniquely positions Equity Group to tap into the growth potential.
To tap into this opportunity, the Group completed the acquisition of Cogebanque in Rwanda on 30th November 2023, which was subsequently merged into our existing business adding Kshs 36.7 billion in assets resulting in a subsidiary with significant scale with total assets of Kshs. 127.7 billion and 18% market share.
This firmly positions Equity as the second-largest bank in Rwanda, which is one of the fastest-growing economies in the world.
Equity’s Strategy is anchored on building sustainable financial ecosystems, evolving with the needs of the customers and the economies we help to connect. From its heritage as a core banking services provider, and a market leader in Kenya with a market focus served on banking infrastructure and technology build-out, Equity Group has evolved into an integrated financial services and technology platform, a richly diversified regional lender, and continues to scale the value chain and connecting fragmented supply chains and trade routes.
