Kshs 000's | Q3 2009 | Q3 2010 | Q2 2011 | Q3 2011 | ||||
Total assets | 97,422,640 | 136,584,452 | 171,352,419 | 195,377,260 | ||||
Net loans and advances | 58,143,947 | 70,904,578 | 97,711,984 | 109,366,657 | ||||
Customer deposits | 65,660,674 | 97,017,969 | 144,501,820 | 123,987,006 | ||||
Loan: deposit ratio | 89% | 73% | 68% | 88% | ||||
Total interest income | 7,839,595 | 9,883,116 | 8,310,553 | 13,554,541 | ||||
Total interest expense | 1,130,035 | 1,493,636 | 1,044,687 | 2,439,223 | ||||
Net interest income | 6,709,559 | 8,389,480 | 7,265,865 | 11,115,318 | ||||
Total operating income | 11,269,371 | 16,506,583 | 13,151,039 | 20,455,896 | ||||
Total operating expense | 7,052,223 | 10,042,900 | 7,315,395 | 11,446,694 | ||||
Cost: income ratio | 63% | 61% | 56% | 56% | ||||
Profit before tax | 4,217,148 | 6,463,683 | 5,835,645 | 8,989,202 | ||||
Profit after tax | 3,384,473 | 5,125,581 | 4,737,626 | 7,292,920 | ||||
Earnings per share | 1.14 | 1.93 | 1.75 | 2.63 | ||||
Return on assets | 3.5% | 3.8% | 2.8% | 3.7% | ||||
Change from prior period | Q3 2010 | Q3 2011 (1) | Q3 2011 (2)* | |||||
Total assets | 40% | 14% | 43% | |||||
Net loans and advances | 22% | 12% | 54% | |||||
Customer deposits | 48% | -14% | 28% | |||||
Loan to deposit ratio | -16% | 20% | 15% | |||||
Total interest income | 26% | 63% | 37% | |||||
Total interest expense | 32% | 133% | 63% | |||||
Net interest income | 25% | 53% | 32% | |||||
Total operating income | 46% | 56% | 24% | |||||
Total operating expense | 42% | 56% | 14% | |||||
Cost to income ratio | -2% | 0% | -5% | |||||
Profit before tax | 53% | 54% | 39% | |||||
Profit after tax | 51% | 54% | 42% | |||||
Earnings per share | 69% | 50% | 36% | |||||
Return on assets | 0.3% | 0.9% | -0.1% | |||||
*The column titled Q3 2011 (1) shows the change from the results of Q2 2011 to Q3 2011, while Q3 2011 (2) gives the change between Q3 2010 to Q3 2011.
Analysis:
Equity Bank saw increases of 32% and 24% in its interest income and total operating income. Equity also had a very profitable quarter, with a 42% growth in its PAT figure.
Net loans and advances grew substantially from Q3 2010 to Q3 2011 while customer deposits dropped from Q2, though the figure of 124B was still higher than 97B posted in Q3 2010.
Total interest expense increased more than twofold from Q2 of the same year, and by 63% from Q3 2010. The value of total assets rose by 43% and the return on assets also increased slightly from the previous quarter.
The cost to income ratio dropped 5 points to 56% in Q3 2011 from 61% in 2010 due to the increase in expenses in the period.
Equity’s annualized earnings per share were Kshs. 2.63 for Q3, following the growth in the bank’s profits. The P/E ratio is 7.55, based on a share price of Kshs. 19.85 by the close of trading on 2 November 2011.
Outlook:
Although Equity Bank, a microfinance bank, is faced with the same challenges as most banks in Kenya today, it has managed to post impressive results in this past quarter. Inflationary pressure and rising Central Bank lending rates have led the bank to raise its own lending rate to 15%, which still remains lower than other banks.
In a statement at the bank’s recent investor briefing, CEO Dr. James Mwangi said that though the bank had faced several challenges, they intended to continue with the good performance in the next quarter by placing emphasis on increasing their customer value proposition. He said the impressive profits were due to high staff productivity, an effective business model and an improved loan book. Based on the strategies they had laid out in the previous quarter, they increased their focus on understanding the customers’ needs, pushed for more output from their staff and optimized their IT facilities. The bank plans to stick to this strategy in order to maintain consistent growth in Q4.
Recently, a World Economic Forum report listed Equity Bank as one of 16 New Sustainability Champions in the global emerging markets. Already the bank has a network of over 5000 Equity Agents who provide the bank’s services where there are no fully fledged branches yet. Furthermore, the bank offers its services through various mobile platforms, notably the M-Kesho mobile account which has successfully reached out to customers who didn’t have access to financial services before. This has drawn a lot of SME clients who have driven its growth thus far. In the future, Equity hopes to venture into mortgage financing so as to diversify its services. Equity’s customer base and branch network continues to expand rapidly and is likely to continue doing so for the foreseeable future.
