Equity Group bounced back in the first quarter of 2024 reporting a 25 per cent increase in its net profit to Sh16 billion compared to the Sh12.8 billion recorded for same period in 2023.

The stellar financial results announced on Monday marks a significant turnaround after the group posted a 5 per cent decline in net profit for the full year ending December 31, 2023.

The regional lender has credited the significant and swift profit recovery to sound decisions made by the company’s top leadership and the prudent management of its balance sheet.

Equity Group’s total assets also expanded significantly by 9.6 per cent to settle at Sh1.7 trillion in Q1 2024, from Sh1.5 trillion the financial institution reported in Q1 2023.

Even as its customer deposits went down marginally to Sh1.2 billion from Sh1.5 billion, its loans and advances increased to Sh779.2 million from Sh756.3 million posted in Q1 2023.

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The lender’s strategic focus on lending saw its interest income from loans and advances increase 31.9 per cent to Sh27.3 million in Q1 2024 compared to Sh20.7 million in Q1 2023.

Net interest income (the money it earned from loans and investments after deducting interest expenses) increased by 28 per cent to Sh27.8 billion in the first quarter of 2024.

The net interest income growth is credited to a 32.7 per cent rise in total interest income to Sh43 billion, that was partly tamed by a 41.4 per cent interest expense rise to Sh15.2 billion.

Non-funded income, which is mainly income from fees including deposit, transaction, and cheque deposit fees, went up by 21 per cent to Sh22.2 billion in the period under review.

In that period, operating income rose 127.5 per cent to Sh4.8 billion, commissions and fees up 19.2 per cent to Sh10.9 billion, and fees from loans spiked 37.6 per cent to Sh2.8 billion.

Operating expenses went up by 19.7 per cent to Sh23.6 billion driven by a 20 per cent surge in other expenses to Sh13.5 billion and an 18.4 per cent rise in staff costs to Sh7.9 billion.

Equity Group’s cost-to-income ratio went down by 137 basis points year-on-year to 47.1 per cent, as income realized from its forex dealings declined by 25.6 per cent to Sh3.8 billion.

During the initial three months of 2024, net loans and advances rose 3 per cent to Sh779.3 billion, while investment and government securities rose by 20.6 per cent to Sh473.2 billion.

Similarly, the Group’s customer deposits increased significantly by 11.3 per cent to settle at Sh1.2 trillion, while its borrowed funds decreased by 3.9 per cent to Sh109.6 billion in Q1.

Equity Group CEO Dr James Mwangi said the firm adapted to a challenging economic environment characterized by high inflation, interest rates and currency fluctuations.

“The recovery momentum is strong after accepting and adapting to the new normal of operating in an environment characterized by Volatility, Uncertainty, Complexity and Ambiguity – VUCA. An environment defined by high inflation, interest rates and volatile currency exchange rates,” stated Mwangi.

Dr Mwangi says the Group's adopted stricter credit underwriting, resulting in a slower loan book growth (3 per cent year-on-year) compared to 2023, but a healthier credit risk profile.

Despite this, Equity Group’s non-performing loans (NPLs) grew to Sh120.4 billion from Sh80.3 billion in Q1 2023, as provisions for NPLs also rose by 74.5 per cent to Sh6.1 billion.

During Q1 2024, the Group‘s customer deposits increased by 11 per cent to Sh1.24 trillion.

Equity Group's regional subsidiaries contributed 63 per cent to its pre-tax profits, retaining their position as top-five players in five of six operating countries, and top position in three.