Equity Group, expects to boost its loan book this year as it shifts from government securities, its chief executive said on Tuesday.
The lender, which also operates in Uganda, Tanzania, Rwanda, Burundi, South Sudan and Democratic Republic of Congo, more than doubled its pretax profit last year as income rose and bad debts dropped.
“There is a huge opportunity of re-allocating (assets),” James Mwangi, the group’s CEO, told an investor briefing.
Equity had parked 394 billion shillings ($3.45 billion) in government securities at the end of last year, double the amount in the previous year, and it will shift some of that to higher yielding customer loans, he said.
Kenya’s central bank approved Equity’s interest rate pricing plan, Mwangi said, making the shift to increased customer lending possible.
Kenya removed a cap on lending rates in late 2019 and the central bank is engaging all lenders with a view to approve their individual pricing mechanisms.
Equity, which is the only lender to have its plan approved so far, will charge customers interest rates of 13-18.5%.
“We can now accommodate all borrowers,” Mwangi said, referring to those who had been pushed out of credit by the rate cap.
Total costs at the group slid last year, partly due to customers shifting to digital channels, Mwangi said, forecasting expenses would drop further this year.
The group reported a jump in its interest income for the period, as well as income from transactions.
It slashed its provisions for bad debts to 5.84 billion shillings from 26.63 billion shillings in the prior year, boosting pretax profit 134% to 51.9 billion shillings.
Equity recommended a payout of 3.00 shillings per share, resuming a dividend payment for the first time since 2018. It did not pay a dividend for 2019 and 2020 to build up capital.
After 2 years of operating in a COVID-19 environment, Equity has emerged as the regional financial sector market leader as defined by financial parameters; balance sheet, asset size, profitability, customer base and market capitalisation at the Nairobi Securities Exchange.
Equity has emerged stronger, transformed, and registered record financial performance and has strengthened its social contract with society, remaining focused on its purpose while learning valuable lessons;
• Human resilience through innovation and creativity; humanity has in a record time developed a COVID-19 vaccine giving hope to overcome the health crisis.
• Sustainability is built on social contract of shared prosperity.
• You can do good while doing well and the two are not mutually exclusive; purpose can be profitable if executed sustainably on an appropriate business model.
• Business can be a force for development if it operates with a twin economic and social engine and can achieve sustainability and harmony with society when the two engines are in sync and parity.
• The power of a compelling and inspiring purpose helped to rally the staff, customers, and other stakeholders against adversity.
The Equity Group family has an excellent track record in this regard and was able to overcome the fear of uncertainty and COVID-19 related deaths to carry on the purpose of saving and transforming lives, giving dignity while expanding opportunities for wealth creation and keeping the lights of the economies on.
• A crisis is an opportunity to innovate and act expeditiously to facilitate and support customers; never waste a crisis.
Equity Group has recorded superior performance for the year ended 31st December 2021 despite the challenging operating environment characterised by a global COVID-19 pandemic.
Profit After Tax increased by 99% to Kshs 40.1 billion from Kshs 20.1 billion with Profit Before Tax recording a growth of 134% to Kshs 51.9 billion up from Kshs 22.2 billion the previous year.
Despite a 24% growth in staff costs to Kshs 19.1 billion, growth in other operating costs to Kshs 36.5 billion up from the Kshs 30.6 billion, total costs recorded a decline of 16% to Kshs 60.5 billion down from Kshs 71.9 billion driven by an 81% decline in loan loss provision to Kshs 4.9 billion down from Kshs 25.9 billion the previous year.
Portfolio at risk declined to 8.3% down from 11% with non-performing loan coverage increasing to 98% up from 89%. In absolute terms, total non-performing loans declined to Kshs 44.5 billion down from Kshs 50.6 billion.
Total Assets grew by 29% to Kshs 1.305 trillion up from Kshs 1.015 trillion driven by a corresponding 29% growth in customer deposits to Kshs 959 billion up from Kshs 740.8 billion resulting in excess cash being deployed in low yielding government securities at 9.6 %, while cost to income remained fairly constant at 49.1% up from 48.5%.
Return on Average Equity expanded to 26.1% up from 15.3% while Return on Average Assets grew to 3.5% up from 2.3% on the back of benefits of economies of scale and efficiencies of digitisation and a shift of business model from fixed costs to variable cost resulting in the enhanced returns.
The bulk of customers’ engagement and consumption of banking products and services is now on digital channels of internet and mobile on self-service devices delivering 24-hour banking experience and convenience.
