Equity Group Holdings PLC (EGH) today announced its half year results for the period ended 30th June 2020 reflecting a 24% decline in profitability from Kshs 12.0 billion to Kshs 9.1 billion for the corresponding period the previous year.
Topline net interest income was up 17% to Kshs 24.6 billion up from Kshs 21.1 billion the previous year driven by a 22% growth in loan book from Kshs 320.9 billion to Kshs 391.6 billion.
Non-funded income declined by 3% from Kshs 14.5 billion to Kshs 14.1 billion as a result of the waiver of mobile transaction fee in Kenya since April 2020 to drive behavior change towards virtual banking enabled by mobile technology; and lower transactional activity given weak economic activity. Customers shied from use of Merchant Banking and Agency Banking as transactional channels with merchant transactions stagnating as commissions declined by 10% from Kshs 103.3 million to Kshs 93.3million as agency cash in cash out transaction volume declined by 20% from Kshs 54.031 billion to Kshs 42.975 billion with resultant commission declining by 25% from Kshs 1.055 billion to Kshs 789 million.
However, retail digital commerce payments Eazzy Pay and Pay with Equity recorded 49% growth in cumulative number of transactions from 1.152 million to 1.719 million transactions as value of transactions grew by 52% to reach Kshs 9.8 billion up from Kshs 6.4 billion.
Through “Pay with Equity and Eazzy Pay” the Group has facilitated digital retail commerce for customers to minimize the use of cash. Merchant banking has been enhanced by Near Field Communication (NFC) making debit cards and credit cards to have “tap and go” capabilities without pin authentication for small transactions to minimize contact with surfaces. By end of September customers will have access to salary-based loans online on their mobile phones while tea farmers and dairy farmers will access their loans online. The Group has enhanced its online presence while Eazzy Banking app has been revamped as well as Equity Jenga Payments Gateway and APIs
The balance sheet grew by 17% from Kshs 638.7 billion to Kshs 746.5 billion driven by 19% growth in customer deposits to Kshs 543.9 billion from Kshs 458.6, funding that was deployed to grow loans to customers by 22% and investment in Government securities by 20%. Regional subsidiaries grew faster increasing their contribution to the Group profitability to 28% up from 26% same period the previous year. Post balance sheet date, the Group completed the acquisition of 66.53% of BCDC the second largest bank in DRC paving way for the Group to achieve a systemic position after merger and amalgamation of the two subsidiaries in DRC.
To cushion liquidity shocks the Group maintained a liquidity of 54% while Kenya recorded 59.4% liquidity ratio.
The cash acquisition of the second largest bank in DRC, BCDC paves way for the regional subsidiaries to contribute 35 of the Group balance sheet thus diversifying the Group’s risk into a regional risk. Merger of the two subsidiaries in DRC would put the Group on the path of being the largest bank in DRC and making the Group to be systemic in the major markets of Kenya and DRC while diversifying the operating environment from the agriculture and services dominant East African region to the commodity and natural resources rich Central Africa.
On the defensive strategy the Group focused on efficiency and cost optimization that resulted in the Group cost income ratio declining from 52.8% to 48.8%. The Group increased its portfolio credit provision 15-fold from Kshs. 500 million to Kshs.7.7 billion increasing the Group’s NPL coverage from 64% to 73%. To mitigate for loss of mobile transactions fee and merchant banking fees and commissions, the Group focused on Diaspora remittances and increased revenues by 51% from Kshs.398 million to Kshs.601 million while increasing forex income by 20% to Kshs. 2.231 billion up from Kshs.1.859 billion.
