Equity Group Holdings has staged a remarkable turnaround, reporting a 25% surge in first-quarter profit to a record KES 16 billion after a challenging 2023. The rebound underscores the bank’s resilience and deft management amid volatile economic conditions marked by high inflation and interest rates.
After seeing profit dip 5% in 2023, Equity Bank moved swiftly to shore up its balance sheet and credit quality, unleashing a sequence of “bold decisive actions” that have paid off handsomely, according to chief executive James Mwangi.
“The recovery momentum is strong after accepting and adapting to the new normal of operating in an environment characterized by volatility, uncertainty, complexity and ambiguity,” Dr. Mwangi said while unveiling the stellar first-quarter results.
At the heart of the turnround was a pivot to more affordable customer deposits, which grew 11% in the quarter versus 29% for full-year 2023. Equity also pared back costly dollar-denominated borrowing, helping long-term debt decline 21%.
With credit risks elevated, the lender tightened underwriting standards, slowing loan book expansion to just 3% from 26% a year earlier. It reallocated lending away from the private sector toward lower-risk government securities, which surged 21%.
The defensive posture paid off in improved asset quality, with non-performing loans covered at a higher 68.5% and the cost of credit risk dropping to 2.9% from 4.4% in 2023.
“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 noted.
Crucially, Equity enhanced efficiency by automating processes and shifting more activity to digital channels, slashing cost growth to 28% from 52% a year ago. The cost-to-income ratio improved to 47.1%.
The pan-African banking group, which operates in six countries, has emerged as a force regionally with subsidiaries accounting for 63% of first-quarter profits.
Equity has diversified successfully into insurance, with the two-year-old subsidiary posting a 106% profit surge and rapidly gaining market share by leveraging the bank’s vast distribution network.
While near-term headwinds persist from volatile forex rates and elevated interest rates, Equity sees “early signs of calmness” and aims to capitalize on booming intra-African trade as the continent’s free trade pact kicks into higher gear.
“As the global macro-economic headwinds break and pave way for the global recovery, Equity Group is strategically and uniquely positioned to tap into the growth potential of East Africa’s thriving ecosystem,” the bank stated.
