Equity Group Holdings has announced a 13% increase in its profit after tax for the third quarter of 2024, reaching Kshs. 40.9 billion compared to Kshs. 36.2 billion during the same period in 2023.
Key Drivers of Growth
The rise in profitability was fueled by a 13% growth in interest income, which rose to Kshs. 125.9 billion from Kshs. 111.1 billion. This growth was achieved despite the challenges of high inflation and interest rate shocks. Returns to customers in the form of interest expenses increased by 18%, rising to Kshs. 45.3 billion from Kshs. 38.5 billion.
Non-funded income also played a significant role, growing by Kshs. 2 billion, leading to an 8% year-on-year increase in total income, which stood at Kshs. 138.9 billion, up from Kshs. 128.9 billion.
Cost and Operational Metrics
Total costs rose by 6% to Kshs. 87.9 billion, driven by a 27% surge in operating expenses to Kshs. 54 billion. Staff costs saw a modest 4% increase, reaching Kshs. 24 billion. Notably, the loan loss provision dropped significantly by 43%, falling to Kshs. 9.9 billion from Kshs. 17.5 billion.
Regional Contribution and Financial Position
The Group’s regional businesses accounted for 51% of profit before tax and 48% of total assets, which totaled Kshs. 1.7 trillion as of September 30, 2024. Customer deposits grew by 9% to Kshs. 1.3 trillion, supported by an expanded customer base of 21.3 million.
This growth in deposits contributed to a 12% increase in cash and cash equivalents, now at Kshs. 295.5 billion, and a rise in investment securities to Kshs. 468.1 billion. The Group maintained a robust liquidity position of 55%.
Strong capital buffers complemented this performance, with a core capital ratio of 15.9% and a total capital ratio of 18.3%, both exceeding regulatory thresholds of 10.5% and 14.5%, respectively.
Leadership Insights
Dr. James Mwangi, Managing Director and CEO of Equity Group Holdings, stated, “The Group’s strong liquidity positions us to effectively support our customers as economies in our key markets show signs of recovery, signaled by reductions in Central Bank Reference rates in some countries. We continue to optimize our balance sheet by reducing Kshs. 137.6 billion in expensive long-term borrowings.”
He highlighted the Group’s above-industry-average profitability, with a return on average equity of 24.5% and a return on average assets of 3.1%.
Insurance as a Growth Frontier
Equity Group has identified insurance as a critical area for fostering socio-economic resilience. Recently, the Group received a general insurance license to complement its existing life assurance license.
With these licenses, Equity will offer comprehensive financial solutions, including life, health, and wealth protection, to corporate, SME, and retail customers.
Equity Life Assurance (Kenya) (ELAK), the Group’s first underwriting subsidiary, posted a remarkable 181% year-on-year growth in profit before tax, closing at Kshs. 1.07 billion year-to-date, up from Kshs. 381 million in the same period last year.
ELAK maintained a capital adequacy ratio of 141%, underscoring its strong financial health. With a return on average assets of 4.6% and return on average equity of 57.8%, ELAK continues to significantly bolster the Group’s overall performance.