Equity Group, a financial services provider based in Kenya, reported record profits of KES 46.1B and a dividend payout of KES 15.1B for 2022. The report comes amidst a global economic downturn, characterized by stubborn inflation, high interest rates, turbulence in exchange rates, and a financial crisis.
Despite these challenges, Equity Group managed to achieve a 15% YoY growth in net profit and an 11% growth in total assets, leading to a record balance sheet of KES 1.447 trillion. The company’s deposit base also grew by 10% YoY, reaching KES 1.05 trillion in customer deposits.
According to Dr. James Mwangi, Group Managing Director and CEO, Equity Group’s strong performance can be attributed to the deliberate and intentional leadership and management decisions taken during the interest capping period and the COVID-19 pandemic. These decisions enabled the company to navigate the evolving macroeconomic headwinds and turbulence in the financial and economic sectors.
Equity Group’s strong performance can also be attributed to its differentiated proactive strategy and thought leadership, which has defensively positioned the Group for the current challenging macroeconomic environment. The company holds a strong cash buffer of 16% of its balance sheet and has strong liquidity buffers of 52.1%. Its high asset quality portfolio has a Non-Performing Portfolio (NPL) of 7.7%, against an industry average of 13.3%, and a 94% NPL coverage, with credit risk guarantees included.
Equity Group’s shareholder capital buffers are also strong, with core capital to total risk weighted assets of 15.6%, against a minimum legal requirement of 10.5%, and total capital to total risk weighted assets of 20.2%, against a minimum legal requirement of 14.5%.
The company’s strong deposit and liability franchise is evidenced by a 2.3% and 3% interest cost, respectively, and an 18 million customer base. Its long-term debt funding stands at KES 157.5B, and its capital and long-term debt total KES 339.7B, equivalent to 23.5% of total assets. Equity Group’s strong growth momentum is reflected in its non-funded income, which grew by 33%, net interest income by 25%, and total income by 28%. Non-funded income contributed 40% of the total revenue of KES 144.3B.
Equity Group’s strong efficiency is evidenced by a cost-income ratio of 48.4%, a return on average equity of 27.6%, and a 3.4% return on average assets. The company’s high digital adoption rate of 97% has enabled most transactions to happen on digital platforms, offering a strong opportunity for reduction of fixed and variable costs.
The company’s report also highlights its geographical expansion and business diversification as key factors that have strengthened its resilience and risk mitigation. While the Kenyan banking business’s dominant performance continues to decline, other subsidiaries contributed 44% of the Group’s assets and an equivalent 44% contribution to total revenue.
Equity Group’s latest breakthrough is digital e-Commerce payments through Pay with Equity (PWE) rails, which has experienced a 393% growth in transactions. The company believes that the COVID-19 environment has acted as a tailwind for business transformation through innovation and digital adoption.
Equity has decided to promote fuel efficiency and enhance global competitiveness across the economy by providing free e-commerce and digital capabilities to the public and its entire customer base through PWE 800,000 mobile payment rails. Additionally, the Group is committed to supporting its customers with free mobile transactions. To further support its shareholders in the current challenging financial and economic environment, the Group has increased its dividend payout from KES 3 per share to KES 4 per share, resulting in a 33.3% growth in payout. This move has led to a dividend yield of 9% on the 50 cents par value on its shares and a dividend multiple of 8x.
In summary, Equity Group’s strong performance in the face of a challenging macroeconomic environment can be attributed to its deliberate and intentional leadership and management decisions, differentiated proactive strategy, and thought leadership.
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