Equity Bank Group’s profit after tax (PAT) for the third quarter of 2014 has grown by 26pc to KES 11.2bn up from KES 8.9bn 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 CEO, James Mwangi attributed to growing economic activity across the region. Inter country and regional trade within the East African community has risen to above 30pc.
The bank’s successful implementation of its regional expansion strategy saw Equity Bank Tanzania, Uganda, Rwanda and South Sudan subsidiaries collectively posting a 51pc and 137pc 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 re-affirmed with a growth of 23pc being realized against the bank’s net interest income growth of 9pc. Merchant business commissions posted a 69pc growth while insurance, custodial and brokerage fees rose by 35pc, Diaspora remittances grew by 19pc and foreign exchange trading income grew by 15pc.
The Bank’s agency banking network also maintained its rapid development and now has 15,875 agents representing a 70pc Year on Year growth. Plans, Dr. Mwangi said, are also underway to expand the agency offering to include other services including Insurance and Air Ticket sales. Added Dr. Mwangi, “Agents are now processing more cash withdrawals and deposit transactions than the branches and ATMs combined.”
Comparatively, Equity Bank Group’s revenues drawn from other Fees and commissions income at KES 6.5bn up from KES 5.1bn registered within the same period last year, appears to be growing faster than the Fees and commissions income on loans and advances which has been a traditional income driver for commercial banks. Further confirming the bank’s growing reputation as an economic development financier, Equity Bank’s loan book grew by 30pc to KES 206.7bn up from KES 158.6bn and was supported by a 27pc growth in deposits of KES 243bn up from KES 192bn and a 38pc growth in long-term debt to KES 34bn up from KES 24bn.
The Bank achieved a notable improvement in the quality of the loan book with a reduction of cost of risk from 2.7pc to 0.6pc resulting in reduction of provisions for bad debts from KES 2.4bn to KES 900mn while at the same time enhancing NPL coverage from 52pc to 62pc. The quality of the loan book improved significantly reducing the ratio of non-performing loans from 5.5pc to 4.3pc.
The Bank’s total operating income rose by 14pc to close at KES 34.5bn up from KES 30.2bn posted in the same period last year while total expenses marginally grew by 6pc from KES 17.7bn to stand at KES 18.8bn resulting in profit before tax growth of 25pc to KES 15.9bn up from KES 12.6bn. Return on Equity improved to 27.6pc up from 26.4pc while return on assets increased from 4.9pc from 4.6pc for the same period last year. Despite a reduction of 30pc in lending rates, net interest margin declined marginally due to sustained cost of funds. The decline on interest yield saw income cost ratio deteriorate slightly from 46pc to 48pc.
Speaking when he released the bank’s 3rd quarter results, Dr. 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% expansion of the economy. The sustained 6-8% 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,” an optimistic Dr. Mwangi said. He said 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.
Dr. Mwangi 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 3.0 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 107.2million cards worldwide with US$ 33bn 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,” Dr. Mwangi said. “Indeed, we are now a preferred partner for American Express, Visa, PayPal, Google and Union Pay, SWIFT, JCB, VFX, Diners Club and MasterCard,” he added.
“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 our revenues further once the complementary business drivers such as our MVNO operations are commercially launched,” said Dr. Mwangi.
As part of the Equity 3.0 Strategy, the Bank plans to enhance its payment systems significantly on all fronts including mobile based platforms