Equity group reports 4% decline in net profit for Q1 2025

Equity Group Holdings reported a net profit of Ksh15.4 billion for the first quarter of 2025, representing a 4% decrease from the Ksh16 billion earned during the same period in 2024.

The Q1 financial results, released on Thursday, May 29, indicate a mixed performance.

Notably, customer deposits increased by 7% to reach Shh1.32 trillion, highlighting the bank’s strong capacity to attract and maintain its deposit base.

Net loans, reflecting the value of loans expected to be repaid, increased by 3% to Sh804.7 billion, signaling a steady growth in lending activities.

Total assets grew by 4% to reach Sh1.75 trillion, indicating overall expansion of the bank’s balance sheet.

These results demonstrate Equity Group’s ongoing efforts to scale its operations amid competitive pressures in the region.

A key concern is the 12% drop in non-funded income, which refers to revenue not derived from external sources such as grants, loans, investments, or donations, falling to Sh19.6 billion from Sh22.2 billion in Q1 2024.

This decline contributed to a 4% reduction in total income, which decreased to Sh48.2 billion from Sh50 billion.

Non-funded income which includes fees, commissions, and trading revenue, is vital for diversifying the bank’s revenue sources.

The decline points to challenges such as lower transaction volumes or reduced fee income, possibly exacerbated by Kenya’s current economic environment.

This decrease likely contributed to an 8% fall in profit before tax (PBT), which dropped to Ksh18.7 billion from Ksh20.4 billion, and a 4% decline in profit after tax (PAT), down to Ksh15.4 billion from Ksh16.0 billion.

Operational efficiency worsened, with the cost-to-income ratio (CIR) rising to 54.2% from 52.5%, indicating that operating expenses increased faster than income. Total operating costs rose 11% to Sh19.7 billion from Shh17.7 billion.

Staff costs, a major expense, grew 11% to Sh8.7 billion from Sh7.8 billion, reflecting either investment in personnel or inflationary impacts.

On a positive note, loan loss provisions dropped sharply by 44% to Shh3.4 billion from Sh5.9 billion, suggesting improved loan quality or more optimistic expectations regarding loan repayments, possibly due to enhanced risk management.

Equity Group’s net interest margin (NIM) fell by 0.7 percentage points to 8.0%, signaling some pressure on the profitability of interest-earning assets.

Profitability ratios showed mixed outcomes: return on average equity (ROAE) declined to 23.9% from 28.9%, indicating lower returns for shareholders, while return on average assets (ROAA) held steady at 3.5%.

Together, these figures, alongside the PAT decline, point to softer profitability, likely influenced by the drop in non-funded income and rising costs.

The report also highlighted broader market trends, noting that European equities outperformed U.S. markets in Q1 2025.

This shift may have drawn investor attention away from African markets such as Kenya, providing additional context to Equity Group’s performance.

"We are experiencing significant behavioral shifts and rapid structural changes fueled by technology adoption. This has allowed us to spot emerging trends early, and we are pleased to have acted quickly to align with them," said Dr. James Mwangi, Equity Group Managing Director and CEO, during the announcement.

“Through the Young Africa Works initiative, Equity has disbursed Sh353 billion to 350,149 MSMEs. Additionally, 2.49 million women and youth have received financial education, and 653,372 MSMEs have been trained in entrepreneurship,” Dr. James added.

He also commended everyone contributing to Equity Group’s progress.

"Equity is well-positioned across all our subsidiaries. As we advance in our transformation journey, we foresee substantial opportunities for sustained growth," he concluded.