Keeping Your Business in Mind

Equity bank records 43.7 profit for 2023, proposes 15.1B dividend payout

By Antynet Ford

Equity Bank has maintained its record dividend payout for the year ending December 2023 despite booking a five per cent drop in profit after tax.

The lender’s board has recommended a dividend payout of Sh15.1 billion, marking a dividend yield increase to 11.9 per cent from 8.8 per cent the previous year.

Equity Group CEO James Mwangi said the shareholders will be paid Sh4 per share compared with Sh4 per unit the year before.

“The Sh4 per share dividend amounts to a 36 per cent payout of the total net profit.” Dr. Mwangi said.

The lender’s net profit for the period under review stood at Sh43.7 billion, a five per cent decline from the previous year’s record of Sh46.1 billion.

It attributed the drop to its strategic move to maintain the loan interest charge at 13 per cent in the year to December last year.

This is despite receiving the nod from the Central Bank of Kenya (CBK) to implement the risk-based pricing rate that would have pushed the cost of borrowing up to about 24 per cent.

As a result, interest expense grew at 53 per cent compared to the 30 per cent growth rate of interest income.

“We opted to focus with our zeal of prudent provision, and cushioning consumers against tough economic times that prevailed last year on the back of the depreciating local currency and geopolitical tensions that substantively affected supply chains.” The CEO said.

He noted that the performance reflected strong momentum as net interest income grew by 21 per cent to Sh104.2 billion from Sh86 billion while non-funded income registered a 30 per cent growth to Sh75.9 billion from Sh58.3 billion.

Gross trade finance revenue grew by 90 per cent to Sh11 billion from Sh5.8 billion driven by a 106 per cent growth of trade finance-related lending and 26 per cent growth of trade finance guarantees and off-balance sheet items.

The bank’s total costs grew by 52 per cent to Sh128.2 billion from Sh84.5, principally driven by a growth in loan loss provision.

It grew by 139 per cent to Sh32.8 billion from Sh13.7 billion.

Other operating expenses and staff costs grew by 39 and 28 per cent, respectively, driven by high inflation and depreciation of the Kenya shilling.

Return on average equity stood at 22.3 per cent against an 18 per cent cost of capital.

Nevertheless, the lender boasts of an increased customer base in the period under review, with customer numbers growing to 19.6 million.

This translated to an increase in customer deposits, which grew to Sh1.4 trillion from Sh1.1 trillion the previous year.

The loan book also subsequently increased to Sh887.4 billion from Sh706.6 billion.

Overall, the Group’s total assets grew to Sh1.82 trillion from Sh1.45 trillion the previous year as shareholder’s funds grew to Sh218.1 billion from Sh182.2 billion.

The Group registered a Portfolio at Risk (PAR) of 11.7 per cent, a slight improvement from 12.2 per cent at the end of the third quarter in September, and favorably compared with 14.8 per cent of the general banking industry NPLs.

PAR measures how much credit risk there is with loans.

Mwangi pointed out that the NPL trend is consistent with management’s view at the investors 3rd quarter briefing that the NPLs had peaked.

“Prudent risk management culture led the board to approve a proactive de-risking of future performance by providing for the lifetime expected loss on outstanding NPLs and increasing loan loss provision by 139 per cent driving cost of risk to 4.4 per cent while increasing NPL coverage to 67.3 per cent.”

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