Equity shakes off economic gloom to grow profit by 30pc

By James Anyanzwa

Equity Bank Group’s third quarter profit grew by 30 per cent on what the management attributed to reduced funding costs coupled with strong and sustainable net interest margins.

The Group’s profit before tax (PBT) for the nine months to September 30 jumped from Sh9.09 billion in a similar period last year to Sh11.79 billion.

The Bank’s regional subsidiaries (Rwanda, Uganda, Tanzania and Southern Sudan) and the insurance and investment banking business contributed Sh3.75 billion (14.1 per cent) of the total revenues.

Group Chief Executive, James Mwangi, said the bank’s underlying business model of collecting large volume, small ticket savings and short-term deposits ensured that the cost of funding remained at manageable level.

Mwangi said the bank would keep its focus on customer acquisition to maintain and sustain an attractive net interest margin, which remained high at 12.7 per cent during the period under review.

Net interest margin refers to the difference between yield on interest earning assets and cost of interest bearing liabilities.

“These impressive results have been achieved despite challenging macroeconomic environment characterised by high inflation and high interest rates for the better part of the year,” Mwangi told an investor briefing in Nairobi yesterday, adding that Equity Bank would also focus on subordinated debt to improve interest margins.

Expanding margins

According to the Group’s unaudited financial statements released yesterday, total income grew by 30 per cent to Sh26.65 billion from Sh20.46 billion last year, buoyed by net interest income accruing from growth in customer loans and expanding margins.

Operating expenses rose 30 per cent to Sh14.96 billion from Sh11.47 billion in a similar period last year. This was mainly due to the Group’s sustained investments in information technology infrastructure, regional subsidiaries, and opening of additional branches.

Non-interest income grew marginally by one per cent from Sh9.34 billion to Sh9.42 billion, due to the decrease in fees on new loans as lending slowed and trading in Government securities declined.

Mwangi said the Bank would seek to benefit from opportunities arising from the growth in the East African region and its banking sector. Equity Bank is present in five countries in East Africa including Kenya, Uganda, Rwanda, South Sudan and Tanzania.

“The East African Community (EAC) regional integration offers a unique opportunity to expand into neighboring regions where the bank’s successful banking model can be replicated,” said Mwangi.

Total deposits

According to the period under review, Equity Bank Group’s total deposits grew 10 per cent to Sh164.59 billion from Sh149.66 billion last year, while net loans and advances rose 20 per cent to Sh131.34 billion from Sh109.37 billion last year.

Interest expense on customer deposits grew by 123 per cent, reflecting the high cost of funding driven by the high interest rate regime. Interest income on loans and advances advanced 81 per cent to Sh20.27 billion from Sh11.19 billion.

Meanwhile, total interest income