Equity Group Announces Kshs 15.1 Billion Dividend Amid Strong Performance

: The Equity Group is pioneering positive outcomes for all with its Africa Recovery and Resilience Plan, visionary leadership, and strategic positioning.

 By Charles Wachira

Equity Group Holdings has proudly announced a proposed record dividend of Kshs 15.1 billion (US$ 116,884,751) for the second consecutive year, a significant achievement that underscores its robust financial performance in 2023.

 Dr James Mwangi, Group Managing Director and CEO, emphasised, “The Kshs. 4 per share dividend amounts to a 36% payout of the Kshs. 43.7 billion (S$ 338,269,114) profit after tax, or Kshs 11.1 earnings per share, and a dividend yield of 11.9% on the 2023 year-end closing share price of Kshs. 33.65, or 800% on par value.”

The financial results for 2023 underscored strong momentum, with net interest income growing by 21% to Kshs 104.2 billion (US$806,582,190) from Kshs 86 billion (US$665,701,232) and non-funded income registering an impressive 30% growth to Kshs 75.9 billion (US$587,520,040) from Kshs 58.3 billion (US$451,283,509).

 A 106% rise in lending related to trade finance and a 26% increase in trade finance guarantees and off-balance sheet items drove a 90% increase in gross trade finance revenue to Kshs.11 billion (US$85,147,832) from Kshs.5.8 billion (US$44,961.24).

 However, total costs escalated by 52% to Kshs 128.2 billion (US$992,359,278) from Kshs 84.5 billion (U$654,090,164), primarily due to a 139% rise in loan loss provisions to Kshs 32.8 billion (US$23,895,353) from Kshs 13.7 billion (US$106,047,744), aimed at bolstering asset quality buffers.

 The depreciation of the Kenyan shilling and high inflation also caused a 28% increase in staff costs and a 39% increase in other operating expenses. 

The return on average equity stood at 22.3%, exceeding the 18% cost of capital.

 Profit after tax decreased by 5% to Kshs 43.7 billion (US$338,269,114) from Kshs 46.1 billion (US$ 356,846,823), mainly due to a 53% increase in interest expenses compared to a 30% growth rate in interest income.

With a 29% increase in customer deposits to Kshs 1.358 trillion (US$10,511,886,896) from Kshs 1.052 trillion (US$8,143,229,024), the group’s gross balance sheet increased by 26% to Kshs 1.821 trillion (US$14,095,836,552).

Shareholders’ funds increased by 20% to Kshs 218.1 billion (US$ 1,688,249,287) from Kshs 182.2 billion ( US$ 1,410,357,726). 

 The deployment of funding saw net loans rise by 26% to Kshs.887.4 billion (US$6,869,107,828) from Kshs.706.6 billion (US$5,469,587,099), while government securities holdings grew by 27% to Ksh 500.5 billion (US$3,874,226,356.00) from Kshs.394 billion ( US$ 3,049,840,528)  

Cash and cash equivalents increased by 25% to Kshs 290.1 billion ( US$ 2,245,580,551) from Kshs 232.4 billion ( US$ 1,798,941,468).

Equity Group has demonstrated remarkable resilience, navigating challenges such as interest rate capping, the COVID-19 pandemic, global supply chain disruptions, and volatile global economic conditions, including FX volatility, high inflation, and interest rates. 

Over the past seven years, amidst these adversities, customer numbers have surged to 19.6 million from 10.4 million, customer deposits have risen to Kshs.1.358 trillion (US$10,511,886,896) from Kshs.303.2 billion ( US$2,346,983,878), and the loan book has grown to Kshs.887.4 billion ( US$ 6,869,107,828)  from Kshs.269.9 billion ( US$ 2,089,218,168). Total assets have soared to Kshs.1.822 trillion ( US$ 14,103,577,264) from Kshs.428.1 billion ( US$ 3,313,798,807), while shareholders’ funds have climbed to Kshs.218.1 billion ( US$ 1,688,249,287) from Kshs.72.1 billion ( US$ 561,089,494), a testament to the group’s stability and resilience.

Said Dr. Mwangi, “ The Group has navigated these challenges through a deliberate and strategic approach, reinforced by a robust risk management governance framework and a strong organisational culture emphasising innovation, customer-centricity, compliance, and prudent risk management.” 

The Group achieved a PAR of 11.7%, improving from 12.2% in the third quarter and outperforming the industry NPL ratio of 14.8%.

 Dr. Mwangi also noted, “The proactive derisking strategy involved providing for the lifetime expected loss on outstanding NPLs and increasing loan loss provisions by 139% to Kshs 32.8 billion (US$253,895,353) from Kshs 13.7 billion ( US$106,047,754), resulting in a cost of risk of 4.4% and an increased NPL coverage of 67.3% without guarantees and 90% with guarantees.”

Motivated by a vital mission and a risk management culture, Equity Group has received recognition through awards like the Oslo Business for Peace Award. 

In addition, Brand Finance has named it the second-strongest global banking brand.

The group maintains strong risk buffers,  53.4% liquidity, and excellent asset quality. Its total capital-to-risk-weighted asset ratio of 18.1% exceeds the regulatory requirement of 14.5%.

The core capital to risk-weighted asset ratio stood at 14.3%, comfortably above the regulatory threshold of 10.5%, positioning the group well for its growth strategy.

Looking ahead, Equity Group is strategically positioned in one of the world’s fastest-growing regions, East Africa, which boasts significant economic potential. With a diversified business model encompassing banking, insurance, health, technology, and philanthropy, the group is set to capitalise on growth opportunities, innovate, and enhance its service delivery, a promising outlook for the future.

Dr. Mwangi concluded, “With clarity on our Africa Recovery and Resilience Plan, strong leadership, and strategic positioning, Equity Group is uniquely positioned to deliver positive outcomes for all stakeholders.”

Keywords:Record Dividend: Financial Performance: Asset Quality:Balance Sheet Growth: