Equity Bank profit after tax for the third quarter of 2014 grew by 26 per cent to Shs11.2 billion up from Sh8.9 billion in the same period last year.
With a complement of 9.2 million customers, the bank’s net income recorded enhanced growth during the trading period ending September 2014, in what Equity Bank Group Chief Executive Officer, Dr James Mwangi attributed to growing economic activity across the region. Inter country and regional trade within the East African community has risen to above 30 per cent.
The bank’s successful implementation of its regional expansion strategy saw Equity Bank Tanzania, Uganda, Rwanda and South Sudan subsidiaries collectively post a 51 per cent and 137 per cent growth in deposits and a profit after tax respectively promising growing contribution by the regional subsidiaries going forward.
Additionally the bank’s strategy to grow its alternative strategic income streams was further reaffirmed with a growth of 23 per cent being realised against the bank’s net interest income growth of 9 per cent. Merchant business commissions posted a 69 per cent growth while insurance, custodial and brokerage fees rose by 35 per cent, Diaspora remittances grew by 19 per cent and foreign exchange trading income grew by 15 per cent.
The Bank’s agency banking network also maintained its rapid development and now has 15,875 agents representing a 70 per cent Year on Year growth. According to Mwangi, plans are underway to expand the agency offering to include other services including Insurance and Air Ticket sales.
“Agents are now processing more cash withdrawals and deposit transactions than the branches and ATMs combined.” Comparatively, Equity Bank’s revenues drawn from other fees and commissions income rose to Shs 6.5billion up from Shs 5.1billion registered within the same period last year.
Further confirming the bank’s growing reputation as an economic development financier, Equity Bank’s loan book grew by 30 per cent to Shs 206.7billion up from Shs 158.6billion and was supported by a 27 per cent growth in deposits of Ksh 243 billion up from Shs 192 billion and a 38 per cent growth in long-term debt to Shs 34Billion up from Shs 24 billion.
The Bank achieved a notable improvement in the quality of the loan book with a reduction of cost of risk from 2.7 per cent to 0.6 per cent resulting in reduction of provisions for bad debts from Shs 2.4 billion to Shs 900 million while at the same time enhancing NPL coverage from 52 per cent to 62 per cent. The quality of the loan book improved significantly reducing the ratio of non-performing loans from 5.5 per cent to 4.3 per cent.
The Bank’s total operating income rose by 14 per cent to close at Shs 34.5 billion up from Shs 30.2 billion posted in the same period last year while total expenses marginally grew by 6 per cent from 17.7 billion to stand at Shs 18.8 billion resulting in profit before tax growth of 25 per cent to Shs 15.9 billion up from Shs 12.6 billion.
Return on Equity improved to 27.6 per cent up from 26.4 per cent while return on assets increased from 4.9 per cent from 4.6 per cent for the same period last year. Despite a reduction of 30 per cent in lending rates, net interest margin declined marginally due to sustained cost of funds. The decline on interest yield saw income cost ratio drop slightly from 46 per cent to 48 per cent.
Speaking when he released the bank’s 3rd quarter results, Mwangi acknowledged that the current growth comes hot on the heels of a rapid expansion of East African economies as witnessed by the recent rebasing of Kenya’s GDP which reflected a 25 per cent expansion of the economy. The sustained 6-8 per cent growth rate of Tanzania, Rwanda and Uganda over the recent past boosted the performance of the regional banking subsidiaries.
“Recent Vision 2030 infrastructure investment in energy, roads, ports, airports, railways and revival of manufacturing and construction sector will offer enormous banking opportunities going forward.” Mwangi also observed that the changing global perception about Kenya and rebranding of the East Africa as an oil rich region and relocation of global brands’ Africa head offices to Nairobi together with the upgrade of the UNEP office into a Class 1 status UN Office will enhance business attractiveness of the region.
He acknowledged that the current growth comes hot on the heels of the recent launch of American Express products in Kenya as part of the bank’s Equity corporate growth strategy announced early this year.
The partnership with American Express will facilitate Equity Bank to serve American Express Card Members from any part of the world visiting East Africa.
Currently, American Express holds more than 107.2 million cards worldwide with US$ 33 billion annual revenues.
“With the recent launch of American Express products locally, Equity Bank is now firmly entrenched as the bank with the widest international payments partnerships and ecosystem in Sub Sahara Africa,” Mwangi said.
The strong financial performance that Equity Group has experienced throughout 2014 is an encouraging indicator that the Equity 3.0 strategy is off to a good start with a clear chance of growing revenues further once the complementary business drivers such as MVNO operations are commercially launched.
As part of the Equity 3.0 Strategy, the bank plans to enhance its payment systems significantly on all fronts including mobile based platforms.