Equity Group Holdings has once again proposed a record dividend of Kshs 15.1 billion for the second consecutive year, following a remarkable Kshs 43.7 billion profit after tax.
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.
During the unveiling of the 2023 full-year financial results, Dr. James Mwangi, Group Managing Director, and CEO, stated, “The dividend of Kshs. 4 per share represents a 36% payout of the Kshs. 43.7 billion Profit After Tax, translating to Kshs. 11.1 earnings per share and a dividend yield of 11.9% based on the 2023 year-end closing share price of Kshs. 33.65 or 800% on par value.
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 because of interest expense growing at 53% compared to 30% growth rate of interest income.
The 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.
In line with its purpose, Equity made a deliberate and intentional strategic decision to support its customers through the current macro-economic turbulence of high inflation, depreciating domestic currencies, exchange rate volatility and high interest rates.
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.
Despite approval by the Central Bank to adopt risk-based lending rates, currently at 20% to 24% for consumer and retail lending and treasury bills and bonds, attracting 17% /18%, Equity Group opted to maintain 32% of its consumer loans to salaried civil servants, teachers and private sector employees at 13% interest rate to cushion them and their families during this difficult times.
Equity has also maintained all loans disbursed during the interest rate capping period at 13% interest rate. As a result, interest expense for deposits grew by 53% from Kshs 33.6 billion to Kshs 51.4 billion while interest income on loans grew only by 30%.
Dr. Mwangi pointed out that, “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.”
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.
“With clarity of the Africa Recovery and Resilience Plan, strong leadership and human capital, strategic positioning in one of the world’s fastest growing regions, a diversified business model across banking, insurance, health, philanthropy, technology and its execution, risk management capabilities, resilience and strong buffers, Equity is uniquely positioned to deliver on a positive and promising focus to all its stakeholders,” Dr Mwangi added.
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