Equity Group Half Year Net Profit Jumps 98pc to 17.9Bn

Equity Group Tuesday reported a profit of KSh17.9 billion for the half-year ended June 31, a  98.4 per cent increase over KSh9.02 billion registered for the corresponding period of last fiscal.

The lender’s deposits registered a 51 per cent growth to Ksh820.3 billion up from Kshs 543.9 billion, while long term borrowed funds grew by 78 per cent to Ksh102.3 billion up from Kshs.57.6 billion. 

Net Loans and advances grew by 29 per cent to Kshs.504.8 billion up from Kshs.391.6 billion

Investment in Government securities grew by 46 per cent to Ksh 315.5 billion up from Ksh 216.4 billion resulting in 50 per cent growth in Total Assets to Ksh 1.12 trillion up from Ksh 746.5 billion. declining to 61.5 per cent down from 72.0 per cent.  

“The strong capital and liquidity ratios have positioned the Group well for continued execution of the offensive strategy particularly in light of improving asset quality and operational efficiency and an improving operating environment,” said James Mwangi, CEO at Equity Group at an investor briefing on Tuesday.

Analyst Commentary

Equity Group Holdings is expected to benefit from cost efficiencies and growth in Non-Interest Income (NII) as it leverages its low cost operating model that will enable the transition from fixed cost to third party variable cost channels and self-service platforms.

Additionally, the dividend policy was formalized during the Group’s last AGM to pay out between 30.0% to 50.0% profit after tax starting the year ending December 2021.

We anticipate that dividends will be paid in FY21. The Group’s management is looking to transform its trade finance business, rolling it out as a global division with the view of being in the top 5 Trade Finance Bank in Africa by 2024.

It is also planning on offering derivatives in the DRC as well as interest rate commodities and foreign exchange trade.

Lastly, with its large customer base and distribution channels, the Group is interested in setting up an insurance business unit with the possibility of offering cross border insurance.

With the above initiatives projected to diversify revenue, we maintain our HOLD recommendation with a fair value of Ksh 52.25.

Genghis Capital