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Equity Group Registers Balance Sheet Growth amid pandemic

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Equity has registered a 51% growth of funding enabled loans to customers grow by 30% to Kshs 478 billion up from Kshs 366 billion. Cash and cash equivalents grew by 186% to Kshs 247 billion up from Kshs 86 billion. Investment in Government securities grew by 26% to Kshs 217 billion up from Kshs 172 billion.

The Group has weathered the COVID-19 disruption to register a 51% growth in its balance sheet with total assets growing to Kshs 1.015 billion (One trillion and fifteen billion shillings) up from Kshs 674 billion the previous year. The growth delivered through both organic and merger & acquisition strategies saw the group become the first financial institution to cross the trillion shillings rubicon in East and Central Africa. The growth has been driven by a 53% increase in customer deposits which grew to Kshs 741 billion up from Kshs 483 billion, while long-term debt financing grew by 71% to Kshs 97 billion from Kshs 57 billion with shareholders’ funds growing by 24% to Kshs 139 billion up from Kshs 112 billion.

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Net interest income grew by 23% to Kshs 55 billion up from Kshs 45 billion driven by a 30% growth on customer loan book and 26% growth in investment in Government securities. Non-funded income grew at 27% to reach Kshs 38 billion up from Kshs 30 billion to contribute 41% of the total income. Forex trading income grew by 77% to stand at Kshs 6.2 billion up from Kshs 3.5 billion. Diaspora remittances commissions grew by 76% to Kshs 1.5 billion up from Kshs 0.9 billion. Volume of Forex trading increased by 51% to Kshs 863 billion up from Kshs 571 billion with Diaspora remittance contributing 32% of the volume of forex traded.

Total operating costs grew by 67% to Kshs 71 billion up from Kshs 42.5 billion driven by a 496% growth in gross loan provision of Kshs 26.6 billion up from Kshs 5.3 billion in the prior year, increasing the cost of risk to 6.1% up from 1.3% the previous year. The higher loan loss provisions enhanced NPL coverage to 89%.

As part of the Group’s commitment to support lives and livelihoods, keep the lights of the economies on by avoiding massive disruption of economic activities, the Group accommodated Kshs 171 billion of loans for customers whose repayment capacity was adversely impacted by Covid-19. This represents 32% of the entire gross loan book of Kshs 530 billion. As at 31st December Kshs 40 billion of the restructured loans had resumed repayments and normalized. A deep dive review of the entire Kshs 171 billion accommodated loans revealed doubts on the future viability and quality on Kshs 9 billion of loans promoting the downgrade of the said doubtful loans to NPL (IFRS 9 Stage 3) increasing the NPL portfolio to 11% up from 10.4% as at 30th September 2020, and 9% as at the end of the previous year and closing the year with 23% accommodated loan book equivalent to 11% of the balance sheet.

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The Group’s cost income ratio improved to 48.5% from 51.1% the previous year driven by improvement in cost of funds from 2.9% to 2.8% and enhancement of yields on government securities from 10.1% to 10.7% despite realization of capital gains on the securities trading of Kshs 3 billion up from Kshs1.1billion the previous year and 117% growth of mark to market gains to Kshs 7.4 billion up from Kshs 3.4billion.

Yields on loans declined from 12.6% to 12.4% due to increased suspended interest on increased NPL book and change of loan book mix of local currency to US$ currency to 57%:43% from 64%:36% ratio in favour of the local currency as a result of acquisition and merger of BCDC in DRC and increase of 186% on cash and cash equivalent. The profit after tax contribution from the business outside Kenya grew to 28% from 18%.

The Group continued to transform itself into a low-cost operating business model, by enabling self-service capabilities for customers and transforming the banking experience from the place you go, to something you do on devices. Digitization has enabled 98% of all Group transactions to happen outside the branches with 85% of the transactions being on self-service mobile and Internet banking and 12% of the transactions happening on Agency and Merchant banking third party variable cost infrastructure. Only 3% of transactions happened on fixed cost brick and mortar branch and ATM infrastructure. 97% of the loan transactions are conducted on the mobile channel delivering unparalleled convenience to borrowers, round the clock banking that compresses geography and time to allow whatever time, wherever location banking experience.

For the first time ever, branches handled less than half of transaction value, accounting for only 37.4% of such value with the 62.6% of the value of transactions taking place outside the branch. Adoption of digital payments was accelerated with the number of transactions processed over the Pay with Equity solutions growing by 31% and the value of the transactions growing by 58% to reach Kshs 2 trillion up from Kshs 1.3 trillion. The Group intensified its social impact investments for shared prosperity with communities. Cumulative spend on shared prosperity programmes reached Kshs. 51 billion equivalent of US$ 464,515,524. The Group’s flagship secondary school scholarship programmes, Wings to Fly and Elimu, delivered in partnership with Mastercard Foundation, KfW and Government of Kenya reached 26,304 beneficiaries. Pre-university paid internship beneficiaries reached 6,713 while scholars who had attended universities reached 13,775 with633 scholars attending or alumni of global universities.

Young Africa Works programme’s aim to create 5 million jobs in 5 years in partnership with Mastercard Foundation saw 121,478 Micro Small and Medium Enterprises, MSMEs trained in entrepreneurship with 141,106 of them accessing Kshs 57.5 billion in loan facilities. 2,182,615 women and youth have been trained in financial education through Equity Group Foundation’s Financial Knowledge for Africa (FiKA) initiative. Over 2 million farmers have been impacted with 39,589 medium sized farmers being supported to transit into agribusiness

The Group Board of Directors has not recommended a dividend for the year ended 31st December 2020, opting to prudently devote internally generated funds to the Group’s successful offensive and defensive strategy that has seen the balance sheet expand by 51% with deposits growth of 53% and loan grow

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