Regional banking group, Equity Bank’s reduction of interest rates by 700 bps from 25% to 18% has paid off by growing its loan book by Kshs 11 billion to Kshs 150 billion from Kshs 139 billion in the first quarter 2013 resulting in a growth of 21% in Year on Year.
The massive reduction in interest rates increased the customers’ ability to service their loans resulting in improvement in the quality of the loan book holding NPL ratios stable compared to the first quarter 2013 despite the challenges in the macro-economic environment.
The growth in the loan book compensated for the reduced interest rate resulting in a minimal reduction in interest income contribution to the total income by 3% from 67% to 64% quarter on quarter.
The focus on Agency Banking and several strategic initiatives on merchant business, payment processing and facilitation paid off driving deposits growth by 20% to Kshs 187 Billion as at 30th June 2013 from Kshs 155.7 Billion as at 30th June 2012. The rapid growth in deposits helped to grow the liquid assess to 41% of the balance sheet with Government Securities increasing by 39%. The number of customers grew to 8.3 million maintaining Equity as the largest bank by customer base in Africa. The convenience of Agency Banking has led to the channel taking the lead as the most preferred delivery channel overtaking conventional channels like ATMs and branch over-the-counter transactions. The cost income ratio reduced from 50% to 49% as a result of internal process optimization initiatives as well as the growth of Agency Banking.
Equity Bank’s total assets grew by 19 percent during the period to close at Kshs 261.60 billion in June 2013 compared with Kshs 219.89 Billion as at 30th June 2012. The bank’s long term borrowings increased by 13 percent to Kshs 25.6 Billion up from Kshs 22.7 Billion on the back of an enhanced global rating for the bank.
The bank’s strategic initiatives aimed at facilitating payments processing such as the Visa Personal Payments, PayPal withdrawal service, Account Based Money Transfer by Western Union, Moneygram , MasterCard World Wide recently introduced Mobile Point of Sales (MPOS) technology and PayPass enabled debit and prepaid cards as well as BebaPay card to facilitate commuter payments in partnership with Google tipped growth of other incomes which contributed 36% of the total income as compared to 34% at the end of 2012.
The ongoing focus on product innovation, prudent cost and risk management has seen profit after tax grow by 17 percent in the first half of 2013 to Kshs 6.31 Billion from Ksh 5.40 Billion posted within the same period last year. This is despite a depressed economic environment around elections in Kenya, suspended oil trade in South Sudan and budgetary support challenges in Uganda and Rwanda in the earlier part of the period. The Group posted a profit before tax of Kshs 8.95 Billion up from Ksh 7.62 Billion posted during a similar trading period in 2012.
Commenting on the results during an investor briefing, Equity Bank Group CEO and Managing Director, Dr. James Mwangi said the bank will benefit from an improved economic environment and plans to continue focusing on innovation and technology, new market segments, consolidation of regional businesses and growing the networks and channels to sustain growth in the second half of the year.
“An improved trading environment, diversification of the bank’s portfolio along with strategic global and local partnerships, regional expansion and increase in the number of Equity Bank agents will drive growth and deepen the bank’s penetration into the market,” Dr. Mwangi said.
Dr. Mwangi said the firm remained committed to its long term growth strategy to sustain growth. “The bank will continue to strengthen its unique business model through innovation, enhanced use of technology and automation for a better customer experience,” he said.
Equity Bank’s total income grew by 15 percent to Ksh 20.24 Billion from Ksh 17.56 Billion, posted during a similar period in 2012 while total operating expenses rose to Ksh 11.39 Billion from Ksh 10.00 Billion for the period under review, a 14 percent increase.
Equity bank is well positioned through strategic partnerships to take advantage of the significant volume of mobile and merchant payments in the market at lower cost than traditional transactions and these include the recently introduced Equity Bank’s PayPal Withdraw Service to withdraw available funds from the PayPal account to the Equity bank account; the recent inclusion of Visa Personal Payments: innovative, fast and affordable money transfer service in Africa; and the recent partnership between Kenyatta University, MasterCard WorldWide and Equity Bank to launch the Kenyatta University Alumni Card a new prepaid, PayPass™-enabled card that allows alumni to enjoy discounts with selected partners, ranging from hotels, bookshops and hospitals to insurance companies and mobile phone service providers.
According to The Banker Global Ranking Insight-Top 1000 world banks 2013 published in July 2013, Equity Bank was ranked No 4 globally in asset deployment efficiency, No 12 in Capital Deployment Efficiency while on Soundness (Capital Asset Ratio) the bank was ranked No 94.
Equity Bank was also recently ranked as the 2013 Overall Best Bank in Kenya, Best Bank tier 1 and the most customers friendly in terms of affordability in a survey conducted in an evaluation of the industry in Kenya published by Think Business magazine.