Equity Bank just announced its financial results for the first quarter of 2018 and the books show a growth of sh1 billion in after-tax profit, a jump of 22 % from last year’s earnings. The Bank attributes the improved performance to a continued build in momentum from last year when the firm grew its profits by 14 %. Nevertheless, the banking industry has been facing challenges from the effects of the interest capping law and disrupted business environment from 2017’s pronged election period. On the other hand, 2018 is expected to be a recovery year as normalcy continues to take shape. Here is a summary of Equity Bank’s financial performance with a focus on four areas.
Fintech
The 2017 Fintech Ecosystem Report done Business Intelligence revealed that the world over, Fintechs were disrupting the financial services market and traditional providers were responding more proactively as a result. Equity’s innovation in the Fintech space is proving those findings true, the bank has introduced a Point of Sale (POS) devices for businesses that enables processing of credit cards from major credit card companies like Visa and MasterCard. Additionally, the bank has the Eazzy Pay POS which allows mobile phones to process credit card payments on a touch and go basis, through a technology known as NFC.
These new additions are attributed to growing the volume of merchant banking from Ksh12.651 last year to Ksh17.203 billion, which is a growth of 36 %; additionally, commissions grew by a twentieth. The bank also managed to merge technology with financial services to increase its remittances from the diaspora from Ksh3.2 billion last year to Ksh18.6 billion in 2018, as a result earning Equity Ksh117 million: representing a 183% income increase in the last three months. Equity has been active in the remittances services with its most recent move being to restructure pricing in the PayPal to Equity cash transfer service reducing its charges to 1% for withdrawals of $5,000 and above and 1.5 % on transactions of $500 and below on amount withdrawn.
Subsidiaries Performance
Equity’s subsidiaries, mainly defined based on location, type of investment and Equitel: performed well. They grew their contributions to the company’s profit by 65 % (1.5 billion) in the period under review. The bank’s branches outside Kenya including Tanzania and South Sudan registered growth with the South Sudan branch growing profitability by 291%, Tanzania by 68%, Rwanda 58%, DRC 78% and Uganda 28 %. On the other hand, Equity Investment Bank (the branch that deals with securities trading ) grew profitability by 481% while Equitel (the banks Mobile Virtual Network Operator (MNVO) partnership with telecom company Airtel grew by 204 %.
Digitization
Equity bank has heavily invested in digitization and is channelling customers to use facilities outside its brick and mortar facilities. If you are keen enough you will notice hence, the bank has higher withdrawal charges when one withdraws from its physical branches versus from agents and ATM machines to encourage the use of its off-premises channels. Currently, customers process up to 97 % of all transactions outside Equity’s brick and mortar branches. A testament to that is the bank lending 92 % of all loans in the first quarter of 2018 through online channels. That is through internet banking and the Eazzy app where one can do all functions they would normally do in a bank 24 hours a day.
Overall performance
As a whole, the bank reduced its total costs in the period under review by 1% while growing its income by 9%, this, in turn, improved its cost to income ratio to 47.5% from 49.4 % in 2017. Equity also improved its loan book with Non-Performing Loans (NPL) standing at 6.3 % against a 12 % industry average. The bank acquired 1 million new customers which raised its total customers to 12.2 million while growing customer deposits to Ksh382.4 billion up from Ksh349.3 billion.
This performance boosted its balance sheet to pass the half a trillion shillings mark. On the other hand, Equity’s non-funded income (money derived from bank charges, transaction fees, services charges as opposed to interest from loans) accounted for 41% of its Ksh16.5 billion first-quarter income. The income included merchant commissions which grew by 23 %, mobile banking commissions by 75%, bond trading commissions by 152 %, trade finance income by 32 % and Swift & RTGS(money transfer to other banks within the country) by 45%.
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