- "The regional banking subsidiaries contributed 63 per cent of the Sh20.4 billion profit before tax with a return on average equity of 27.6 per cent, cementing the Group's position as the regional banking leader," Mwangi said.
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Relative growth across subsidiaries pushed Equity Bank Group's net profit for the first three months of the year to Sh16 billion from Sh12.8 billion in the same period last year.
Unveiling the bank's Q1 results on Monday, Equity Group MD and CEO James Mwangi attributed the growth to differentiated strong leadership decision-making and an agile balance sheet.
"Decisive actions saw growth in deposits placements to 11 per cent compared to the deposits growth of 29 per cent registered for the year ended December 31, 2023, as the Group skipped expensive deposits,'' Equity Bank Group MD and CEO James Mwangi told investors on Monday.
However, growth in long-term borrowed funds saw a decline of 21 per cent year on year for the period ended 31st March 2024 as the Group paid out maturing repriced expensive dollar-denominated loans.
Elevated credit risk characterised by a high non-performing loan environment saw the lender enhance credit risk underwriting resulting in a three per cent year-on-year growth in the loan book compared to a 26 per cent growth rate for the year ended December 2023.
This also led to the reallocation of lending from private-sector credit to public-sector lending through government securities, which grew to 21 per cent.
Consequently, the cost of credit risk dropped to 2.9 per cent for the period from 4.4 per cent for the year ended December 31.
The loan-to-deposit ratio stood at 63 per cent as March 31 compared to 65.3 per cent in the corresponding quarter last year.
There was slow customer deposit growth and a decline in long-term loans yielding a lower year-on-year growth of interest expense compared to 53 per cent for the year ended 2023.
Interest income for the period grew to 33 per cent compared to 30 per cent in December last year.
Growth of net interest income accelerated to 28per cent for the period compared to 21 per cent for the year ended December 31, 2023.
Provisions grew to 84 per cent compared to 139 per cent last year, with NPL coverage reporting improving to 68.5 per cent compared to 67.3per recorded last December.
He hailed the rapid growth in Uganda, Rwanda, Tanzania, DRC, and South Sudan.
"The regional banking subsidiaries contributed 63 percent of the Sh20.4 billion profit before tax with a return on average equity of 27.6 per cent, cementing the Group's position as the regional banking leader," Mwangi said.
The Group cemented its position as the second largest bank in East Africa in terms of assets base to close the quarter at Sh1.7 trillion up from sh1.53 trillion same period last year.
The Group’s mark-to-market losses reduced to Sh48.4 billion from a high of Sh78 billion in the third quarter.
"A strong risk management framework for a strong trusted brand, strong capital, liquidity, and asset quality buffers have helped leadership and management in being bold and decisive,'' Mwangi said.
Group liquidity stood at 52.1 per cent with a balance sheet of Sh1.69 trillion nearly split equally between a loan book of Sh779 billion and liquid assets of Sh752 billion split between cash and cash equivalent of Sh279 billion and investment in government securities of Sh473 billion.
A strong liability franchise with 20 million deposit customers contributed Sh1.236 trillion of Sh1.69 trillion and was underpinned by long-term funding of Sh343 billion made up of long-term debt funding of Sh125 billion and Sh219 billion of share capital and shareholders' funds.
The Group in pursuit of financial inclusion has built a diversified loan portfolio, spread 40 per cent among corporates and large enterprises, 26 per cent among micro, small and medium enterprises, 28 per cent retail and consumer and six per cent among public service institutions in all sectors and segments of the real economy.
This helped to diversify credit risk concentration.
Group NPLs peaked at an elevated level of 13. per cent but compare favorably with the industry NPL ratio of 15.5 per cent and coverage of 68 per cent.