EQUITY BANK HALF YEAR 2011 ANALYSIS: EARNINGS UP 57.4% BUT INFLATION STARTS TO BITE

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Equity Bank Group today morning released its financial results for the Half Year ending June 30^th 2010

Profit After Tax was up 57.4% to stand at Kshs. 4.74 Billion. The Bank registered a Profit Before Tax of Kshs. 5.84 Billion, a growth of 51.8%

The difficult business environment which has seen inflation jump to 14.4% and forecast to get higher has begun to show as the bank registered a minimal Quarter on Quarter growth. Others would even argue that the Q2 performance was flat in comparison to Q1

A few weeks ago, I wrote on the LIKELY IMPACT OF HIGH INFLATION ON THE NSE

For its 1^st Quarter results for 2011, Equity Bank had seen Profit Before Tax shoot up by 72.77% to Kshs. 2.89 billion. Profit After Tax had increased from Kshs. 1.25 billion in 2010 Q1 to Kshs. 2.33 billion in Q1 2011, a growth of 86.4%.

With its huge retail base, consisting of clients many of whom sit at the bottom of the earning scale and have borne the brunt of inflation, Equity is expected to suffer more than the other top 5 banks, with the exception of The Co-operative Bank

The bank increased its Government Securities by 4% to Kshs 27.46 billion up from Kshs 26.39 billion.

Equity though, managed to sign up more than 1.3 million new customers, now totaling 6.3 million, representing a 28% growth.

Speaking during the release of the bank’s half year trading results, Equity Bank Group CEO Dr. James Mwangi expressed optimism that the bank is geared towards maintaining the growth momentum.

He added: “our success has been driven by prudent risk management practices, increased efficiency and innovation on the delivery channels, products and services front.”

The cost income ratio has come down from 62% to 56% during the period.

Reflecting its capital strength and liquidity, Equity Bank Group also maintained a more than 11% and 13% score above the statutory capital and liquidity requirements respectively.

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011          Kshs.	Q2 2011          Kshs.	% CHANGE
TOTAL INTEREST INCOME	4 BILLION	4.31 BILLION	+7.8%
TOTAL INTEREST EXPENSE	424.3 MILLION	620 MILLION	+46.1%
NET INTEREST INCOME	3.6 BILLION	3.67 BILLION	+1.8%
TOTAL OPERATING INCOME	6.5 BILLION	6.65 BILLION	+2.3%
TOTAL OPERATING EXPENSE	3.65 BILLION	3.67 BILLION	0%
COST:INCOME RATIO	56%	55.1%	-0.5%
PROFIT BEFORE TAX	2.89 BILLION	2.95 BILLION	+2%
PROFIT AFTER TAX	2.34 BILLION	2.40 BILLION	+2.5%

The Quarter on Quarter analysis shows that the bank grew by low single digits from the previous quarter. 

Interest expense was up 46%

It would not be unlikely if the bank does not grow in Q3 in comparison to Q2. Despite the IMF revising the growth targets of the Kenyan economy, banks are not expected to have as rosy a year as they did in 2010.

H1 2010 vs. H1 2011 Analysis

	H1 2010  Kshs.	H1 2011  Kshs.	% CHANGE
TOTAL ASSETS	122.5 BILLION	171.35 BILLION	+39.9%
NET LOANS AND ADVANCES	68.25   BILLION	97.71   BILLION	+43.2%
CUSTOMER DEPOSITS	87.82 BILLION	130 BILLION	+59.4%
LOAN:DEPOSIT RATIO	77.7%	75.2%	-2.5%
TOTAL INTEREST INCOME	6.42 BILLION	8.31 BILLION	+29.4%
TOTAL INTEREST EXPENSE	1 BILLION	1.04 BILLION	+3.7%
NET INTEREST INCOME	5.41 BILLION	7.27 BILLION	+34.2%
TOTAL OPERATING INCOME	10.12 BILLION	13.15 BILLION	+30%
TOTAL OPERATING EXPENSE	6.28 BILLION	7.36 BILLION	+16.5%
COST:INCOME RATIO	62%	55.6%	-6.4%
NET NON PERFORMING LOANS	2.57 BILLION	1.98 BILLION	-23.3%
PROFIT BEFORE TAX	3.84 BILLION	5.84 BILLION	+51.8%
PROFIT AFTER TAX	3.01 BILLION	4.74 BILLION	+57.4%
FORWARD PRICE/EARNINGS RATIO	-	9	-

The Rwandan market still beckons for Equity Bank

Kenya Commercial Bank (KCB) releases its results tomorrow. In the Half Year 2010, KCB had a Profit Before Tax of Kshs. 4.2 Billion