Equity to cool off State securities as half-year profit hits Sh34.6b

From left: Equity Life Assurance (Kenya) Limited MD Angela Okinda, Equity Group CEO, Dr James Mwangi, Equity Group Foundation Operations Director Joanne Korir and Equity Bank Kenya MD Moses Nyabanda, during the Half Year 2025 Investor briefing in Nairobi, on August 11, 2025. [Wilberforce Okwiri, Standard]

Equity Group Holdings has revealed plans to reduce its exposure to government securities by over 80 per cent as it reallocates its balance sheet to reflect the changing economic climate.

A sustained drop in the Central Bank Rate (CBR), now at 9.75 per cent, has partly informed this decision, as the financial services company is also bullish that it has put the necessary strategies to handle risks associated with lending to the private sector.

Group Chief Executive James Mwangi said the lender is not looking into growing its balance sheet but optimising the existing potential through reallocation of investments to the highest earning asset classes.

"We will optimise profitability if we are able to reduce government securities from Sh540 billion to about Sh75 billion. That means about Sh450 billion needs a home in loans," he said during the release of the firm's half-year results in Nairobi yesterday.

During the review period, Sh540.9 billion was held in government securities, a slight increase from Sh459.2 billion during the first half of 2024. Profit after tax for the Group went up 17 per cent during the period to Sh34.6 billion.

This is while net interest income grew from Sh54.4 billion to Sh59.3 billion, with non-financial income dropping from Sh42.8 billion to Sh40.9 billion compared to the same period last year.

Net loans, on the other hand, closed the six-month period at Sh825.1 billion, a growth from Sh791.1 billion.

Equity Group has banking subsidiaries in Kenya, trading as Equity Bank Kenya Ltd; Tanzania, Rwanda, Uganda, South Sudan, and the Democratic Republic of Congo.

Noting the growth of net loans, which went up four per cent, Mwangi exuded confidence that the robust mechanisms put in place by the bank would ensure non-performing loans (NPL) do not spike.

NPLs for the Group had hit 14 per cent at the beginning of the year but have slightly eased to 13.7 per cent, with a notable drop in Tanzania to 2.9 per cent from 10.6 per cent and Uganda to 12.2 per cent from 17.9 per cent.

"What excites me about the balance sheet, for the first time in four years, net loans have grown by four per cent. We have developed the capabilities to lend in a challenging environment," he said.

He said government securities currently offer returns of eight per cent, yet customers are not willing to pay 14 per cent interest on loans.

"If you shift it [government securities] to lending towards small and medium enterprises (SMEs), it will be 16 per cent," he said.

"Banking is intermediation. It is not being a lazy bank giving money to the government. If we take a risk, it is very well priced, actually overpriced."

Equity Bank Kenya Managing Director Moses Nyabanda said as the macro-economics settle, the bank is ready to engage customers.

He said even as the bank, which holds 50 per cent of the Group's balance sheet, looks to engage the private sector, the government needs to tackle other issues such as pending bills, which would unlock liquidity in the market.

"We are in a good position in that the macro-economic environment has turned and we now can leverage and allocate the bonds we have held, which is a significant part of our balance sheet - over 40 per cent - into real intermediation," said Nyabanda.