Equity Group has posted a 3.7 percent rise in net profit to Sh34.6 billion in the first nine months of trading from Sh33.4 billion, helped by subsidiaries despite the earnings in Kenya dipping by a fifth.
The growth in profit from businesses outside Kenya, excluding South Sudan, helped the group escape a decline in earnings despite its single largest contributor to profits—Equity Bank Kenya—posting a 20 percent drop in net profits to Sh19.34 billion.
Subsidiaries in the nine months ended September last year contributed Sh11 billion or 31 percent of net profit but this has risen to Sh18.5 billion or 53.5 percent of the net earnings in the period under review.
Equity Group chief executive James Mwangi said elevated inflation, the continuing weakening of the shilling against major currencies and the rising interest rate have all impacted customers, forcing the lender to absorb part of the hit through the profit and loss (P&L) account.
“We chose to use the P&L to mitigate the full impact of inflation, deprecation, and high interest by ensuring we didn’t pass the full impact to the customer. The interest expense is for instance growing much faster than the interest income, deliberately to accommodate the customer for at least one year,” said Mr Mwangi.
The drop in profit in Kenya was in contrast with DRC’s Equity BCDC posting a net profit growth of 142 percent to Sh11.4 billion, with Mr Mwangi expecting the subsidiary to this year, beat Kenya in terms of return on equity and return on assets.
Net profit of Rwanda unit was up 46 percent to Sh2.8 billion as Uganda and Tanzania saw a 23 percent and 136 percent rise to Sh2.1 billion and Sh0.7 billion respectively. That of South Sudan was flat at Sh1.5 billion.
“If we thought the group was getting to maturity because Kenya is now close to maturity, the entire group has become a startup all over again because of the momentum in DRC, Uganda, Rwanda and the newfound energy that Tanzania is bringing to the table,” said Mr Mwangi.
Group net interest income grew by 21 percent to Sh72.6 billion on increased lending and repricing of loans while non-interest income was up 40 percent to Sh57.8 billion.
Operating expenses however rose by 46 percent from Sh57.8 billion to Sh84.5 billion on a near doubling of provisioning for loan defaults and a rise in staff costs and other operating costs, slowing the pace of growth in profits.