Regional Diversification Pays Off Amidst Domestic Headwinds

Equity Group Holdings Plc has announced a net profit of Sh52.1 billion for the nine months ending September 30, 2025, a 32.66% increase from the Sh39.2 billion recorded during the same period in the previous year. This significant growth comes at a time when Kenya's economy is experiencing a slowdown, with institutions like the World Bank and IMF revising growth forecasts downwards. The group's performance highlights the success of its regional diversification strategy, with subsidiaries in the Democratic Republic of Congo (DRC), Uganda, Rwanda, and Tanzania making substantial contributions to its bottom line.

Subsidiaries: The New Growth Engine

The regional banking businesses have become a cornerstone of Equity's profitability, contributing 45% of the Group's profit before tax. The Kenyan subsidiary, while still the largest single contributor, saw its dominance lessen as regional units posted impressive growth. The DRC subsidiary, Equity BCDC, was a standout performer, recording a 21% year-on-year growth in net profit to Sh13.8 billion. This makes it the second-largest contributor to the group's earnings. Uganda's profit grew by 61% to Sh2.9 billion, while Tanzania's nearly doubled, growing by 88% to Sh1.5 billion. The Rwandan subsidiary also posted a healthy Sh4 billion net profit. According to Group CEO Dr. James Mwangi, this performance reflects the strength of the bank's diversified business model and its commitment to empowering MSMEs and leveraging digital platforms across the continent.

Kenyan Operation: A Story of Efficiency

In Kenya, despite a challenging economic environment marked by high interest rates and reduced private sector credit growth, the banking unit demonstrated remarkable resilience. The Kenyan subsidiary's net profit grew by a staggering 51.2% to Sh31 billion, up from Sh20.5 billion in the previous year. This was not driven by increased lending, as its balance sheet actually shrank slightly. Instead, the growth was a result of significant efficiency gains. Dr. Mwangi attributed this to a sharp drop in the cost of funds, which decreased by 20.6%. As government borrowing rates came down, the bank passed on the benefits to customers, leading to a 16% growth in the net interest margin. Furthermore, the cost-to-income ratio for the Kenyan unit improved dramatically, falling from 57% to 47%, indicating that the bank is now spending less to generate revenue.

Asset Quality and Future Outlook

A key area of improvement for the group was its asset quality. The pile of non-performing loans (NPLs) dropped by Sh10 billion between June and September 2025, settling at Sh129 billion. The Group's NPL ratio improved to 12.1% in the third quarter, down from 14% in the first quarter and below the Kenyan banking industry average of 17.1% as of September 2025. This improvement was particularly notable in Uganda and Tanzania. The group's total assets grew by 6.7% to Sh1.8 trillion, while customer deposits saw a modest 2.2% increase to Sh1.3 trillion. Looking ahead, Dr. Mwangi expressed optimism, noting that the execution of the group's strategic plan, focused on agriculture, manufacturing, trade, and SMEs, is beginning to bear fruit. The bank's non-banking ventures, particularly its insurance arm, also showed strong growth, with Equity Health Insurance reporting a profit of Sh140 million. With regional subsidiaries projected to continue their strong performance, Equity Group appears well-positioned to navigate the mixed economic outlook and sustain its growth trajectory across the East and Central Africa region.