EUR 25.34 For Business Accounts Only

Equity Group Holdings 1H18 Earnings Update

Equity Group Holdings (NSE: EQTY) released 1H18 financial results reporting a 17.6% increase in EPS to KES 2.90 from KES 2.47 in 1H17. The increase was buoyed by Net Interest Income (NII) which grew 9.1% y/y to KES 19.6Bn, coupled with Non-interest Revenue (NIR) that grew 1.5% y/y to KES 13.2Bn. Total operating expenses were kept in check, declining 1.9% y/y attributed to a 57.7% decrease in Loan Loss Provisions (LLP), while staff costs remained muted, recording slight growth of 1.3%. The balance sheet grew 7.3% y/y (2.7% q/q) driven primarily by investment in government securities that increased 51.2% y/y (5.8% q/q), as the loan book rose 3.8% y/y (1.5% q/q). The bank maintains high liquidity through investments in government securities, with the liquidity ratio now at 57.1% (51.1% in 1H17), in anticipation of a repeal of the interest rate caps. We maintain our SELL recommendation on Equity Group at a target price of KES 38.96. This represents a downside potential of 21.7% from the current market price of KES 49.75.