Equity Group posted a mild 5.32% y/y increase in profit after tax (PAT) to KES 36.20Bn by close of Q3’23. However, the trailing earnings per share (T-EPS) momentum declined 105bps to KES 12.23 over the quarter. The lender’s bottom-line growth was driven by a 21.32% y/y increase in funded income to KES 72.6Bn and a 36.90% y/y increase in non-funded income to KES 57.8Bn. On the flipside, the strong revenue growth was watered down by a 46.35% y/y surge in operating expenses. The trailing ROaE and ROaA decelerated to 25.1% and 3.1% respectively in Q3’23. The Group’s net interest margin widened 20bps y/y to 7.1% while the profit margin edged down y/y to 27.76%.
The Group’s loan book expanded by 25.52% y/y to KES 845.92Bn faster than the 19.89% y/y growth in the customer deposits to KES 1.21Tn leading to a 314bps climb in the loan-deposit ratio to 70.04% from 66.90% recorded in Q3’22. The group’s loan book growth was buoyed by increased lending activity in DRC, South Sudan and Uganda while deposit mobilization was fastest in Tanzania and Rwanda businesses. We note also the proportion of transaction counts via mobile channels increased to 95% compared to 87% in 1H23, while the ratio of the value of mobile loans to branch loans disbursed clocked 42:58 – signaling higher average loan-ticket sizes in the branches. We also observed the share of foreign currency loans marginally climbing to 47.60% from 47.20% in Q3’22 signaling increased hard-currency demand and protracted exchange rate depreciation effects. We observed a 24.01% y/y balance sheet expansion to KES 1.69Tn – which we attribute to unwinding demographic dividends from its growing regional presence.
Valuation – The counter is currently trading at a P/B multiple of 0.74x and a P/E ratio of 3.11x. The counter closed yesterdays trading at KES 38.00, a YTD loss of 14.61%. We maintain our BUY recommendation on the counter with a target price of KES 56.10 representing an upside of 47.67% from yesterday’s closing price.
