Equity Group Holdings PLC (EGH) has released its financial results for the first half of the year ending on June 30, 2020. The company experienced a decline in profitability, with a 24% decrease from Kshs.12.0 billion to Kshs.9.1 billion compared to the same period the previous year.

The net interest income from core operations saw a positive growth of 17%, reaching Kshs.24.6 billion, up from Kshs.21.1 billion in the previous year. This increase was primarily driven by a 22% growth in the loan book, which expanded from Kshs.320.9 billion to Kshs.391.6 billion. However, non-funded income declined by 3%, from Kshs.14.5 billion to Kshs.14.1 billion. This decline was mainly due to the waiver of mobile transaction fees in Kenya since April 2020, as part of the efforts to promote virtual banking through mobile technology. Additionally, lower transactional activity resulting from weak economic conditions contributed to the decrease in non-funded income. The use of Merchant Banking and Agency Banking as transactional channels also declined, leading to stagnation in merchant transactions and a decline in commissions by 10%, from Kshs.103.3 million to Kshs.93.3 million. Furthermore, agency cash-in and cash-out transactions decreased by 20%, from Kshs.54.031 billion to Kshs.42.975 billion, resulting in a 25% decline in commissions, from Kshs.1.055 billion to Kshs.789 million. On the other hand, retail digital commerce payments, such as Eazzy Pay and Pay with Equity, experienced significant growth. The cumulative number of transactions increased by 49%, from 1.152 million to 1.719 million, while the value of transactions grew by 52%, reaching Kshs.9.8 billion, up from Kshs.6.4 billion.

Total costs increased by 44% to Kshs.26.7 billion, compared to Kshs.18.6 billion in the previous year. This increase was primarily driven by a 15-fold rise in loan loss provision, which reached Kshs.7.7 billion, up from Kshs.500 million. The higher provision was a response to the portfolio risk associated with the adverse impact of the COVID-19 pandemic, including the health control measures, economic shocks, and disruptions in supply chains caused by lockdowns. Dr. Mwangi, the Group Managing Director and CEO, emphasized the importance of adopting a conservative approach due to the uncertainty posed by the pandemic, despite the non-performing loans showing a minimal decline from 10.9% to 10.7% on a quarterly basis and stabilizing below the industry average of 13.1%.

EGH's balance sheet experienced a 17% growth, reaching Kshs.746.5 billion from Kshs.638.7 billion. This growth was driven by a 19% increase in customer deposits, reaching Kshs.543.9 billion from Kshs.458.6 billion. The funds obtained were deployed to expand loans to customers by 22% and invest in Government securities by 20%. The regional subsidiaries also contributed to the Group's profitability, with their contribution increasing to 28%, up from 26% in the same period of the previous year. Additionally, the Group completed the acquisition of 66.53% of BCDC, the second largest bank in DRC, which positions the Group to become systemic in the market after the merger and amalgamation of the two subsidiaries in the Democratic Republic