Equity Bank today announced its full-year results for the financial year ended 31 December 2017. The bank reported a 14 percent year-on-year (y/y) surge in profit after tax to Sh18.9 billion, slightly below the expected Sh19.5 billion.

The bank’s net interest income decreased by 10 percent y/y to Sh37.6 billion, slightly below the expected Sh37.5 billion. Additionally, net interest margin was 8.5 percent more than the expected 8.2 percent.

Non-interest income rose by 22.0 percent y/y to Sh27.6 billion, slightly below the expected Sh27.9 billion while staff costs were higher than the anticipated Sh11.5 billion, down 1 percent y/y. Furthermore, the operating expenses were higher than anticipated, increasing to 17 percent y/y to Sh16.3 billion.

Non-performing loans (NPLs) reduced from 7.4 percent in the third quarter of 2017 to 6.3 percent in the fourth quarter of the same year, an improvement considering the trend of NPLs increasing all the way into February 2018.

The Board of Directors recommended a dividend of Sh2.00 per share in accordance to expectations.

“Of note to us, the loan book growth in 4Q17 was quite strong, cost of customer deposits declined by 20bps to 2.27% but total interest expense remains unchanged. We intend to find out if this is a change in accounting treatment from management. Additionally, cost of risk declined to 1.2% against our estimates of 1.5%. As at the last price of KES 53.50, Equity Bank trades at a P/E of 12.2x and a P/B of 2.2x. Notably, the ROE currently stands at 17.8%. We believe Equity Bank is trading at fair valuations even assuming a reversal of interest rate caps,” Kestrel Research observed.

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