By JAMES ANYANZWA

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Equity Group’s net profit grew by 25.1 percent in the three months to March 31, 2024, boosted by substantial contributions from regional subsidiaries in the Democratic Republic of Congo (DRC) and South Sudan.

The Nairobi Securities Exchange-listed lender’s net earnings increased to Ksh15.39 billion ($118.38 million) from Ksh12.3 billion ($93.893million) in the same period last year.

An analysis of regional businesses by the bank shows 28 percent of the group’s net profit was generated by the Congolese subsidiary, Equity BCDC, followed by Equity Bank South Sudan (14.29 percent), Equity Bank Rwanda (8.44 percent), Equity bank Uganda (5.84 percent) and Equity Bank Tanzania (0.64 percent).

This brings the subsidiaries’ total contributions to the group’s net profit to Ksh8.8 billion ($67.175 million), accounting for 57.21 percent of the group’s overall net profit compared to 45 percent in the same period last year (2023).

Read: Equity regional units grow profit contribution to $116m

Contributions from the Kenyan operations stood 35.73 percent, leaving non-banking businesses driven by the insurance subsidiary’s contribution to the net profit to 7.06 percent.

The South Sudan business posted the highest growth rate in net earnings -- 292 percent to Ksh2.2 billion ($16.92 million) -- followed by Rwanda, whose net profit grew by 73 percent to Ksh1.3 billion ($10 million).

EquityBCDC recorded a 28 percent growth in net profit to Ksh4.3 billion ($33.07 million); Uganda posted two percent rise in net profit to Ksh900 million ($6.92 million); while the Tanzanian subsidiary saw a 51 percent decline in net profit to Ksh100 million ($769,230).

“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. An environment defined by high inflation, interest rates and volatile currency exchange rates,” James Mwangi, Group CEO, told an investor briefing in Nairobi.

The group’s return on average assets -- a financial ratio that assess the profitability of a firm’s assets -- is high in South Sudan, at 39.2 percent, followed Rwanda (4.4 percent), DRC (2.9 percent), Uganda (2.6 percent) and Tanzania (one percent).

Equity is pursuing a geographical diversification plan aimed at increasing revenue sources and guarding against sovereign risks. So far, 50 percent of its assets are owned by regional subsidiaries.

The group completed the acquisition of Rwandan lender, Compagnie Générale De Banque (Cogebanque), on November 3, 2023, allowing the regional lender to own 198,250 shares, representing 99.125 percent of the issued shares of Cogebanque. Cogebanque runs a branch network of 28 and 600 agents in Rwanda.

Read: Equity snaps up Rwanda bank in $47m deal

It is also seeking to revamp its dormant investment banking arm to tap into the investment advisory business across the East African region, as part of the revenue diversification plan.

Equity first entered into investment banking business after acquiring a trading licence from Juanco Investment Bank in 2008. But the investment has not yielded much owing to the poor performance of the NSE, which has seen depressed earnings for stockbrokers and investment bankers.

While details on the planned facelift still remains under wraps, Equity is looking at the revival of the investment banking unit to strengthen its overall revenues to ensure decent returns to shareholders and finance its regional expansion plan geared towards attaining 100 million customers by the year 2030.

The lender, which is majority owned (12.76 percent) by Arise BV, an African investment company backed by three reputable cornerstone investors (Norfund, Rabobank and FMO) has a balance sheet of Ksh1.7 trillion ($13.07 billion) and more than 19 million customers across the region.

Net loans and advances expanded by 3.02 percent to Ksh779.22 billion ($5.99 billion) from Ksh756.33 billion ($5.81 billion), according to the unaudited financial statements released last week.

The groups’ core capital increase by 7.37 percent or Ksh14.52 billion($111.53 million) to Ksh211.47 billion($1.62 billion) from Ksh196.94 billion($1.51 billion), pushing the bank’s lending limit to a single borrower to Ksh52.86 billion($406.61 million) from Ksh49.23 billion($378.69 million).

Kenya’s central bank has capped the lending limit to a single borrower, usually referred to as single obligor limit, to not more than 25 percent of the core capital.

The increase in the core capital allows the lender to fund mega infrastructure projects in the region by making available more resources to a single borrower.