Awards for Excellence 2020
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Kenya’s Equity Bank stands out as a modern financial institution, a domestic champion and a regional player. As a result, it receives this year’s award for Africa’s best bank.
Under the stewardship of chief executive James Mwangi, the bank has come a long way from a traditional bricks-and-mortar institution. After two years of extensive investment in digital technology, it now better reflects the changing needs and behaviour of its customer base.
Mobile banking transactions stood at 595 million in 2019, accounting for 78% of all the bank’s transactions.
Despite a tough operating environment and a cap on interest rates, which saw bank lending in Kenya constrained, Equity Bank returned an 11% increase in pre-tax profit to KSh31.5 billion ($296 million) in 2019 from KSh28.5 billion a year earlier.
This was driven by an impressive 23% growth in the loan book to KSh366.4 billion from KSh297.2 billion in 2018, despite the interest rate cap, which was removed in November 2019.
Mwangi calls that growth the “highlight of last year’s performance”.
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James Mwangi |
He says: “We could have chosen to invest money in treasury bills, which would have given same interest rate, but we stuck with our customers at 13.5% and developed efficiencies, credit scoring mechanism that allowed us to mitigate and to reduce risk.”
At 9%, non-performing loans are below the market average of 12%.
The bank continues to grow, and its strategic focus on enhancing non-funded income to strengthen the quality of earnings continued to generate good results.
Deposits rose 14% to KSh482.8 billion in 2019 from KSh422.8 billion a year earlier. Total revenue grew to KSh75.7 billion from KSh67.3 in 2018, and the bank’s return on equity was 22%.
Access to market-based funding enabled the bank to close the year with KSh56.7 billion of long-term global debt. Mwangi says this has allowed it to consolidate its focus on small and medium-sized enterprises, which made up 65% of the loan book in 2019.
Equity Bank has the largest market share in micro and SME lending, diaspora remittances and merchant banking. Via Equitel, it also has a growing share in transactional mobile banking payments, a segment in which it is the second-largest company after M-Pesa.
Ambitious goal
The bank’s customer base grew by 9% in 2019. It is the largest financial services provider by customer numbers in the eastern and central African region, with KSh673 billion in total assets and a presence in seven countries – Kenya, Uganda, South Sudan, Tanzania, Rwanda, the Democratic Republic of the Congo (DRC) and Ethiopia.
Equity Bank has an ambitious goal to serve 100 million customers by 2024, quite a leap from 13.5 million customers at the end of 2018. It aims to be one of the top five banks in every country in which it operates.
Last year, it agreed to acquire 66.53% of Banque Commerciale du Congo in DRC and opened a representative office in Addis Ababa, Ethiopia. It also plans to diversify into insurance.
However, Equity’s expansion plans have been curtailed by the onset of the Covid-19 pandemic, and in June it called off plans to acquire four banking subsidiaries from London-listed Atlas Mara in order to preserve its capital and liquidity during the crisis.
Mwangi says that for the time being the bank has replaced its regional expansion strategy with a vertical one, to take more market share in the countries in which it already operates.
The bank announced it would not be paying a dividend in its annual report.
