Equity Group HY Results: Profit Tanks 24% to Ksh 9.1 billion

Equity Group HY Results: Profit Tanks 24% to Ksh 9.1 billion

Dr. James Mwangi Group Managing Director & CEO Equity Group Holdings Plc

Equity Group Holdings PLC (EGH) on Tuesday reported a 24 percent decline in its consolidated net profit at Ksh 9.1 billion for the period ended June 30, 2020. 

Profit declined from Ksh 12.0 billion to Ksh 9.1 billion for the corresponding period the previous year.

Topline net interest income was up 17 percent to Ksh.24.6 billion up from Ksh.21.1 billion the previous year driven by a 22 percent growth in loan book from Ksh.320.9 billion to Ksh.391.6 billion.

“Despite NPLs showing a minimal decline from 10.9 percent to 10.7 percent quarter on quarter basis and stabilizing below the 13.1 percent industry average, prudence dictated that we adopt a conservative humble approach in recognizing the risk of uncertainty Covid-19 has imposed on the operating environment,” said Dr. Mwangi, The Group Managing Director and CEO while releasing the results.

Non-funded income declined by 3 percent from Ksh.14.5 billion to Ksh.14.1 billion as a result of the waiver of mobile transaction fees in Kenya since April 2020 to drive behavior change towards virtual banking enabled by mobile technology, and lower transactional activity given weak economic activity.

Total costs increased by 44 percent to Ksh.26.7 billion up from Kshs.18.6 billion driven by a 15-fold increase in loan loss provision which increased to Ksh.7.7 billion up from Ksh.500 million in recognition of portfolio risk associated with the adverse disruption of COVID-19 health pandemic control, management and containment measures and resultant economic shocks and disruptions of supply chains by economic lockdowns.

EGH balance sheet grew by 17 percent from Ksh.638.7 billion to Ksh.746.5 billion driven by 19 percent growth in customer deposits to Ksh. 543.9 billion from Ksh. 458.6, funding that was deployed to grow loans to customers by 22 percent and investment in Government securities by 20 percent.

Regional subsidiaries grew faster increasing their contribution to the Group profitability to 28% up from 26 percent same period the previous year.

The performance as at 30th June 2020 reflects the implementation of both defensive and offensive strategies to respond to the COVID-19 situation that has transformed the operating environment.

Other listed lenders who have published their results include KCB Group’s net earnings dropped by 40 percent to KSh7.5 billion, Co-operative Bank of Kenya fell 3.6 percent to KSh7.3 billion and Stanbic Bank half-year profit dipped by 37.2 percent to KSh2.55 billion.

“The key theme from the banks that have announced so far is negative bottom-line growth (y/y) mainly due to substantial increase in loan loss provisions to cater for the possibility of loan impairments stressed by the current pandemic. As the sector gathers momentum in results announcement during the week, provisioning levels are expected to record significant uptick and market prices for the banks are likely to trade at/or closer at fresh 52-week lows (KCB dropped to a fresh 52 week low – KES 30.00 – after the announcement) depending on the significance of the drop in profitability,” according to the  Genghis Cross-Asset Weekly Strategy – 17th August 2020.