equity bank
Equity Group CEO, Dr James Mwangi.

Equity Group net earnings for the three months to March have surged by 64 per cent to Sh8.7 billion riding on uptick in non-funded income compared to similar period last year when the pandemic hit the country.

In the three-month period under review, the lender’s non-funded income went up by 30.7 per cent to close at Sh10.9 billion, the latest disclosures show.

“This means we have bounced back to pre-Covid period and now have 41 per cent of our income being generated from non-funded income,” said Equity Group CEO, Dr James Mwangi, while presenting the regional lender’s results on Wednesday, May 26.

Amid the pandemic, the bank has managed to shift a great deal of its operation to digital with 44.2 per cent of transaction value now being undertaken via mobile and the internet even as 98 per cent of the regional lender’s transactions occurring outside the branches.

“We supported our customers to move to the digital channels due to COVID-19 because we had set up infrastructure before. The use of the Equity app has grown by 105 per cent,” said Dr Mwangi.

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The lender’s earnings from government securities increased by 36 per cent to Kes.359 billion compared to Kes190 billion recorded by March 2020 as investments in this segment increased by 16 per cent to close at Kes183 billion.

Customer deposits also increased by 58 per cent to Kes790 billion from Kes499 billion in March 2020 even as the loan book registered 29 per cent jump to close the quarter at Kes488 billion.

In the quarter under review, however, Equity Group’s gross non-performing loans surged by 42 per cent to Kes63 billion from Kes45 billion recorded in the corresponding three-month period last year as borrowers hit hard by the pandemic failed to honour loan commitments.

The bank, however, cut its loan loss provisioning in the period by 58 per cent to about Kes1.3 billion compared to Kes3.1 billion in a similar period in 2020.

The lender’s total operating expense also went up 31 per cent to close at Kes 13 billion.

Equally, Equity Group’s total interest expense increased by 42 per cent to Kes5.5 billion from Kes 3.9 billion posted by March 2020.

“Our asset book has grown by 54 per cent year-on-year to Kes 1.066 trillion. It has principally been driven by growth in deposits which grew by 58 per cent,” said Dr Mwangi.

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In a move that is indicative Equity shareholders who sacrificed a dividend of Kes.9 billion in 2020 might be smiling all the way to the bank this year, earnings per share for the lender have rallied to close at Kes2.30 up from Kes1.40 prior.

Comparatively, the bank’s foray into Uganda and Rwanda is steadily matching Kenya in terms of return on assets. Whereas it took Kenya 16 years to get a 4 per cent return on assets, it has taken Uganda 14 years and Rwanda 12 years.

“We are hopeful DRC will be able to match the return on assets in under 10 years,” noted Dr Mwangi.

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