Equity Group’s Regional Expansion Strategy Delivers 33% Profit Surge Amid Kenya’s Economic Headwinds

Kenya’s largest bank by customer base, Equity Group Holdings, has announced a remarkable 32.66 per cent surge in its third-quarter net profit, climbing from Sh39.2 billion in the previous year to Sh52.1 billion. This impressive performance comes at a critical time when Kenya’s economy is experiencing a significant slowdown, offering a glimmer of hope for the broader financial services sector that has been grappling with mounting challenges.

The banking giant’s stellar results were unveiled during an investor briefing in Nairobi on October 30, 2025, where Group Chief Executive Officer James Mwangi, alongside Non-Executive Chairman Isaac Macharia and Equity BCDC Non-Executive Chairman Meti Mabanza, presented a comprehensive overview of the institution’s transformational journey over the past five years.

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Regional Diversification: The Cornerstone of Success

The standout revelation from Equity Group’s third-quarter performance is the critical role played by its regional subsidiaries in driving profitability. In a landmark achievement that underscores the success of the bank’s pan-African strategy, Mwangi disclosed that 49 per cent of the group’s banking revenue now originates from operations outside Kenya. This milestone represents the culmination of a deliberate five-year strategic shift from a predominantly Kenya-focused institution to a truly pan-regional financial powerhouse.

“The race has been won, the subsidiaries in the region are bigger than Kenya,” Mwangi declared during the investor briefing. “We are no longer a Kenyan bank, we are a regional bank. We have more business outside Kenya than we have in Kenya.”

Equity Group’s regional footprint extends across six African countries, including Uganda, Tanzania, Rwanda, South Sudan, and the Democratic Republic of Congo. This geographic diversification has proven to be a strategic masterstroke, effectively insulating the group from the economic headwinds buffeting the Kenyan market.

Impressive Financial Metrics Across the Board

The group’s strong performance was anchored on robust fundamentals across multiple financial indicators. Total operating income grew by 10 per cent, rising from Sh141.7 billion to Sh156.2 billion. This growth was driven by two key components: a 16 per cent jump in net interest income to Sh93.5 billion and a three per cent increase in non-funded income to Sh62.6 billion.

The net interest income growth is particularly noteworthy given the challenging operating environment characterized by reduced loan demand and increased competition for deposits. Non-funded income, which includes fees, commissions, and trading revenues, demonstrated resilience despite the broader economic slowdown, highlighting the group’s ability to generate revenue from diverse sources beyond traditional lending activities.

Kenya’s Economic Slowdown and Banking Sector Challenges

Mwangi painted a stark picture of the financial challenges in Kenya, where customer appetite for loans has significantly waned. The Central Bank of Kenya has been monitoring these trends closely as the banking sector navigates through one of its most challenging periods in recent years.

“The balance sheet in Kenya is not growing. This reflects the market,” Mwangi explained. “The market is going through a very difficult environment, customers are not borrowing, our loans are going down, deposits are not significantly growing. It’s a flat, declining balance sheet.”

The economic slowdown has been characterized by reduced business activity, declining consumer confidence, and tightening credit conditions. While Equity’s lending in Kenya stands at Sh400 billion, the bank is strategically holding an additional Sh600 billion in cash reserves—a ready war chest for when market conditions improve and lending opportunities become more attractive.

This conservative approach to capital management reflects the bank’s cautious outlook on the Kenyan economy while positioning it to capitalize on future growth opportunities. The substantial cash holdings also demonstrate Equity’s strong liquidity position and its ability to weather the current economic storm without compromising its financial stability.

Regional Subsidiaries Drive Profitability

The regional subsidiaries have emerged as the primary growth engines for Equity Group, delivering exceptional performance that more than compensated for the sluggish domestic market. In the Democratic Republic of Congo, one of the group’s most significant markets, profit after tax grew by an impressive 21 per cent to Sh13.8 billion. This strong performance underscores the success of Equity’s acquisition of Banque Commerciale du Congo (BCDC) and the subsequent merger with Equity Bank Congo to form Equity BCDC.

Tanzania posted even more dramatic results, with profit after tax nearly doubling—soaring by 88 per cent to Sh1.5 billion. This remarkable growth demonstrates the bank’s ability to penetrate and capture market share in competitive regional markets while maintaining profitability.

Notably, despite the challenging economic environment in Kenya, Equity Bank Kenya, the group’s domestic subsidiary, still managed to post a 51 per cent growth in profit after tax to Sh31.1 billion. This performance defied the broader economic headwinds and highlighted the bank’s resilient business model and effective risk management practices.

The Transformation from Bank to Financial Group

Mwangi emphasized that the group’s diversification into non-banking businesses is bearing fruit and contributing to the overall financial performance. The technology and insurance segments increased their contribution to total revenue from 2.8 per cent to three per cent, signaling the beginning of what could become significant revenue streams in the future.

“The last five years we have focussed on transforming ourselves. Equity is no longer a Kenyan bank, it is a financial group,” the CEO stated, highlighting the strategic evolution that has redefined the institution’s identity and business model.

This transformation aligns with global trends in banking where traditional financial institutions are expanding beyond core banking services to offer integrated financial solutions. The diversification strategy not only creates additional revenue streams but also reduces the group’s dependence on net interest income, which can be volatile depending on interest rate environments and economic conditions.

The Equity Group Foundation, the social arm of the organization, has been instrumental in building brand loyalty and social capital across the markets where the group operates. Through initiatives in education, healthcare, and enterprise development, the foundation has enhanced the group’s reputation and deepened customer relationships.

Non-Performing Loans: A Growing Concern

Despite the strong profitability, Equity Group is not immune to the quality challenges affecting Kenya’s banking sector. Gross non-performing loans jumped to Sh129.1 billion in the nine-month period from Sh125.3 billion in the same period a year prior, representing an increase of Sh3.8 billion or approximately three per cent.

However, Mwangi noted that despite the challenging environment, Kenya is improving the quality of its loan book. “I want to appeal to Kenyans that we understand the environment. But the most striking thing is despite that challenge, Kenya is improving the quality of its loan book,” he added.

The rise in non-performing loans reflects the broader economic challenges facing Kenyan businesses and consumers. Many borrowers have struggled to service their debts amid reduced business activity, job losses, and declining household incomes. The banking sector as a whole has been implementing various measures to manage credit risk, including stricter lending criteria and enhanced loan monitoring systems.

Setting the Tone for the Banking Sector

As the first major lender to release third-quarter results, Equity’s strong performance sets a positive tone for the local banking sector that is confronting economic slowdown and a crisis of non-performing loans. Financial analysts and market watchers are keenly observing how other banks will perform in the same period.

Listed on the Nairobi Securities Exchange, Equity Group’s shares have been one of the better performers in the banking sector, reflecting investor confidence in the institution’s regional strategy and management capabilities. The bank’s market capitalization has remained resilient despite broader market volatility, demonstrating the market’s recognition of its fundamental strengths.

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Strategic Implications for East African Banking

Equity Group’s success with its regional expansion strategy carries important implications for other financial institutions in East Africa. The bank has effectively demonstrated that geographic diversification can serve as a powerful hedge against country-specific economic shocks and policy changes.

Other major Kenyan banks, including KCB Group and Co-operative Bank, have also been pursuing regional expansion strategies, though with varying degrees of success. Equity’s strong showing reinforces the strategic value of building meaningful scale across multiple markets rather than maintaining token presences in different countries.

The bank’s ability to integrate acquired institutions, such as BCDC in the Democratic Republic of Congo, has been crucial to its regional success. This capability—combining local market knowledge with group-wide systems, processes, and best practices—has enabled Equity to unlock value from its regional subsidiaries while maintaining consistent service standards.

Technology and Innovation as Competitive Advantages

Equity Group has invested heavily in technology and digital banking capabilities, which have become increasingly important differentiators in the competitive East African banking landscape. The bank’s digital banking platforms have enabled it to serve customers more efficiently while reducing operational costs.

Mobile banking and agent banking networks have been particularly important in expanding financial inclusion and reaching customers in remote areas where traditional brick-and-mortar branches would be uneconomical. These channels have also proven resilient during periods of economic stress, maintaining transaction volumes even as formal lending activity has declined.

The contribution of the technology segment to overall revenue, though still modest at three per cent, represents significant potential for future growth. As digital financial services continue to evolve, Equity is well-positioned to capture value from payments, remittances, and other technology-enabled services.

Insurance and Investment Banking Opportunities

Beyond traditional banking and technology, Equity Group has been building capabilities in insurance and investment banking. These businesses offer attractive growth opportunities with different risk-return profiles compared to deposit-taking and lending.

The insurance subsidiary provides the group with fee-based income streams that are less sensitive to interest rate fluctuations and credit cycles. As middle-class populations grow across East Africa, demand for insurance products—ranging from life and health insurance to general insurance—is expected to increase substantially.

Investment banking services, including corporate finance advisory, capital raising, and wealth management, target the growing number of successful businesses and high-net-worth individuals in the region. These services typically generate high margins and help deepen relationships with corporate and affluent retail clients.

Looking Ahead: Challenges and Opportunities

Despite the strong third-quarter performance, Equity Group faces several challenges as it looks to the future. The Kenyan economy’s continued weakness remains a significant concern, as domestic operations still account for roughly half of the group’s revenue. Any prolonged economic malaise could further pressure asset quality and constrain lending growth.

Regional operations, while performing strongly, are not without risks. Political instability, currency fluctuations, and varying regulatory environments across different markets require careful management. The Democratic Republic of Congo, despite its large market and strong performance, has historically been subject to political and security challenges that could impact operations.

On the opportunities front, the group’s strong capital position and liquidity provide flexibility to pursue strategic initiatives. The Sh600 billion cash reserve that Mwangi referenced positions the bank to move decisively when attractive lending or acquisition opportunities emerge. This patient approach to capital deployment reflects prudent management in uncertain times.

Broader Economic Context and Policy Environment

The performance of Equity Group cannot be divorced from the broader economic and policy environment in Kenya and the East African region. Government policies regarding taxation, regulation, and economic management significantly impact banking sector performance.

Recent policy debates in Kenya around issues such as digital lending regulations, interest rate caps (which were previously implemented and later repealed), and bank taxation continue to shape the operating environment. The banking sector has generally advocated for stable, predictable policies that support financial intermediation while protecting consumers.

At the regional level, efforts toward greater East African integration through the East African Community could create opportunities for banks like Equity that already operate across multiple markets. Harmonized regulations and easier cross-border operations would reduce compliance costs and facilitate greater intra-regional trade and investment.

Lessons for Financial Institutions

Equity Group’s performance offers several lessons for other financial institutions:

First, geographic diversification can be an effective risk management strategy, particularly for institutions operating in relatively small or volatile markets. By spreading operations across multiple countries, banks can reduce their exposure to any single economy’s fluctuations.

Second, successful regional expansion requires more than just establishing a presence—it demands genuine investment in building scale, capabilities, and local relationships. Equity’s willingness to make substantial acquisitions like BCDC demonstrates this commitment.

Third, managing through economic downturns requires strong balance sheets, conservative risk management, and the patience to wait for better opportunities rather than chasing volume through risky lending. Equity’s substantial cash reserves exemplify this approach.

Fourth, diversification into complementary businesses like insurance and technology can create additional revenue streams and deepen customer relationships, though core banking expertise remains essential.

Conclusion: A Testament to Strategic Vision

Equity Group’s 33 per cent profit growth to Sh52.1 billion in the third quarter of 2025 stands as a testament to the strategic vision and execution capabilities of its management team. The five-year transformation from a primarily Kenyan bank to a true regional financial group has delivered tangible results, with international operations now generating nearly half of total revenue.

While challenges remain—including Kenya’s economic slowdown and rising non-performing loans—the group’s strong capital position, geographic diversification, and expanding business mix provide multiple levers for future growth. As CEO James Mwangi noted, the race has been won: Equity is now definitively a regional institution with the scale and capabilities to serve millions of customers across East and Central Africa.

As other banks in Kenya prepare to release their third-quarter results in the coming days, Equity’s performance sets a high bar and offers evidence that strategic diversification and patient capital management can deliver strong returns even in challenging times. The financial markets and sector stakeholders will be watching closely to see whether other institutions can match this impressive showing.

For Kenya’s broader economy, Equity’s results offer a mixed message. On one hand, the success of a Kenyan institution in building a thriving regional business is cause for celebration. On the other, the contrast between domestic stagnation and regional growth underscores the urgent need for policy measures to reinvigorate the local economy and restore business and consumer confidence.

As Equity Group continues its evolution from bank to comprehensive financial services group, its journey offers valuable insights into the future of African banking—one characterized by regional scale, technological innovation, product diversification, and the careful balance between ambitious growth and prudent risk management.

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By: Montel Kamau

Serrari Financial Analyst

4th November, 2025