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Regional expansion and diversification strategy pays off as Equity Bank posts a 21% growth

Regional financial services provider Equity Bank Group has returned to its traditional growth path by recording a 21% growth in its first quarter performance amidst a challenging operating environment.

Emerging from a depressed operating economic environment as well as challenges posed by the recent political skirmishes in South Sudan, Equity Bank pre-tax profits for the first quarter 2014 soared by 21% to Ksh 5.4 billion up from Ksh 4.5 billion posted within the same period last year.

The Bank similarly realized a 21% Profit after tax which increased to Ksh 3.8 billion up from Ksh 3.2 billion earned in the same period last year.

Speaking during an investors briefing session at the Group’s Equity Centre headquarters in Nairobi, Equity Bank Group CEO & Managing Director Dr. James Mwangi expressed optimism that the Bank’s performance this year will remain positive driven by the new strategic initiatives anchoring the growth momentum. The primary initiatives are: focus on SME; innovative delivery channels such as agency and mobile banking; merchant acquiring business and payment processing; diaspora banking and remittance processing, regional expansion and diversification into other financial services.

In maintaining its profit growth, Dr. Mwangi further noted that the financial institution had registered significant improvements in the quality of its loan book from initiatives instituted over time.

Customer deposits grew rapidly by 18% to Ksh 206 billion up from Ksh 175 billion while the number of customers continued to grow and closed the quarter at 8.7 million. The Group’s operating income grew to Ksh 11.14 billion up from Ksh 10.2 billion registered in the same period last year. Total expenses remained stable at Kshs. 5.7 billion demonstrating the bank’s success in cost management initiatives. Cost to Income ratio improved to 48.7% from 50% driven mainly by reduced cost of risk from 1.98% in Quarter 1 2013 to 0.72% during the quarter under review.

Driven by a rich portfolio of diversified investments, Equity Bank Group’s total assets grew to Ksh 295 billion up from KSh 252 billion representing a 17% growth year on year. Net loans registered a 28% growth from Ksh 140 billion to Ksh 179 billion as at the end of the first quarter. The Group has continued creating value for its investors registering Returns on Equity (ROE) of 30.5% and Return on Assets (ROA) of 5.4%.

“We are encouraged and at the same time humbled by our first quarter results which speak of utmost corporate resilience and a case of strategy gone right for Equity Bank Group. Notwithstanding the earlier projections for depressed performance and growing NPL’s, we are glad that our customers and the respective national economies continue to show resilience and project a positive outlook,” Dr Mwangi said.

Efforts by the Bank to diversify to a range of demand driven products and services, he added, are also paying off with thousands of Equity Bank customers now enjoying the convenient features of its recently introduced Equity Bank MasterCard Auto Branch ATM cards with PayPass technology which is an addition to the Bank’s cashless payments solutions.

The Bank’s sustained investments in mobile and agency banking, payment systems and money transfer and diaspora remittances and operating expenses reduction strategy Dr Mwangi noted will continue to contribute to the positive growth trajectory.

“We are highly optimistic that the growth momentum will be maintained throughout the year with a number of new products and services set to be launched in the coming months,” said Dr Mwangi.

With its recent core banking software upgrade from Finacle v7 to Finacle v10 with enhanced multi-currency and multi country transactions, Equity Bank is well placed to handle regional and international banking transactions seamlessly.

The upgrade also provides a solid platform to further boost the banks payment systems and payments channels including international card business transactions on both credit and debit modes. During the last quarter of 2013 the Bank announced a partnership with American Express where Equity Bank began acquiring merchants onto the American Express (AMEX) network in Kenya, Tanzania and Uganda ahead of a regional rollout in coming weeks.

During the last quarter, Equity Bank Kenya and VFX Financial PLC in the UK partnered to launch Equity Direct; a real-time, cross border, multicurrency money transfer service from the UK to Kenya. The service enables individuals and corporates in the UK to send money to any account at Equity Bank in the region.

Equity Bank through the Equity Group Foundation as part of its social impact investments offered 410 Wings To Fly top scholars in the 2013 Kenya Certificate of Secondary Education (KCSE) exams employment as they joined the Equity African Leaders Programme (EALP). The programme has so far benefitted 1965 scholars since inception in 1998.

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