Equity skips interim dividend despite Sh43.7bn profit

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Equity Group Holdings reported a 31.5 percent jump in the half-year to June 2026, but opted not to pay an interim dividend with an eye on capital for expansion.

The regional lender posted a profit after tax of Sh43.7 billion in the six months to June, up from Sh33.3 billion made in a similar period last year.

Equity retained a tradition of not issuing interim dividends even as other large lenders such as KCB, Absa, Standard Chartered Bank of Kenya and NCBA Group rewarded their shareholders with higher interim dividends, promising more returns in the future.

“The shareholders constantly remind me that I have to balance between dividend payments and acquisitions. That's what we do, and we are committed,” said Equity Group chief executive James Mwangi.

“The sacrifice that shareholders made during the transformation phase, of only taking 30 percent while the business retained 70 percent, will be rewarded because the subsidiaries have matured and are now joining Kenya in paying dividends by next year,” he added.

Equity Group has disclosed it is building a war chest to enter new markets such as Angola, Mozambique, Zambia, Ethiopia and Libya through acquisitions as it targets to be in 15 countries in the next four years.

The group, which currently operates in six countries - Kenya, Uganda, Tanzania, Rwanda, South Sudan and Democratic Republic of Congo (DRC) - cemented its position as the most profitable bank in the region, riding on non-interest income largely from trade finance.

The bank’s non-interest income rose by 35.9 percent to Sh55.5 billion from Sh40.8 billion, with other income, exclusive of fees and commissions, jumping 55.1 percent to Sh12.2 billion. This usually captures capital gains made from trading government instruments and recoveries from non-performing loans previously written off.

Management said the income did not come from one-off activities but largely from trading by its treasury department, with nearly 60 percent of its Sh2.1 trillion balance sheet held in cash.

“This income is coming significantly from trade finance. It's also coming from the loan appraisal fee - as you can see, the loan book has started growing significantly. It's coming from technology products whose transactions have increased significantly, and it's also coming from insurance business; the insurance income falls under other incomes,” Mr Mwangi said.

The bank said it would be pushing to lend to the private sector more, with its current loan-to-deposit ratio being 62 percent compared to previous highs of over 75 percent. The bank has invested heavily in government securities, which are viewed to be more secure than private sector lending but have lower profit margins.

Its ratio of non-performing loans dropped to 9.5 percent from 13.7 percent last June following aggressive collection by the lender.

Customer savings with the group rose 21.3 percent to Sh1.58 trillion while its loan book rose 18.8 percent to Sh981 billion.

Its investment in Treasury bills and bonds was Sh643.1 billion, which earned it Sh33.2 billion in returns.

Management reckons a decline in interest rates in the region will spur private sector borrowing and drive its earnings in the second half of the year. Kenya reported a double-digit private sector credit expansion in June for the first time in over two years, while DRC has halved the price of loans following the rise of its Central Bank’s reserves.

The Kenyan operation remained the group's most profitable unit, recording 35 percent pre-tax profit growth to Sh29.4 billion, followed by DRC, which posted earnings of Sh16.9 billion.

Tanzania recorded the fastest profit growth after doubling its earnings to Sh2.8 billion, while South Sudan bounced from losses to post a Sh200 million pre-tax profit.

The group’s insurance business recorded a 33.9 percent increase in profit before tax to Sh1.24 billion riding on premium growth.

Reporting originally appeared via Business Daily. Read the full source for additional context.