How Equity Bank became region's most profitable company

After announcing a record profit of Sh75.5 billion for the 2025 financial year, Equity Group Holdings Chief Executive James Mwangi calmly presented the lender’s financial statements once again, but this time, in US dollars (USD).

Mwangi noted that the figures had grown significantly, prompting the lender to begin reporting its balance sheet in USD terms.

“We can confidently say we have made a profit in excess of $700 million,” he said. “We can really talk about USD because it’s big numbers.”

Mwangi said Equity no longer played in the ‘village’ league.

“Equity has been able to move from the village - if Kenya is a village - it has gone East African and won. It has gone to a continental level and is now Africa’s best financial brand. Equity wants to go international, and that is why it has started introducing USD,” he said during an investor briefing in Nairobi on March 18.

This year, Equity Bank has been recognised as the leading bank in a top 10 list of the strongest bank brands in Africa in the Banking 500 2026 report published by Brand Finance Journal.

Equity had a Brand Strength Index (BSI) of 93.9, an improvement from 90.7 in 2025. KCB holds the fourth position in this list with a BSI of 93.0 from 94.4 in 2025.

READ: Mwangi's Sh734m windfall as Equity posts record earnings

Globally, Equity Bank holds the sixth position in BSI. “African brands continue to demonstrate exceptional brand strengths in local markets, with four banks ranking among the top 10 strongest banking brands globally,” said the UK-based journal.

These top four banks include Equity, Capitec Bank and First National, both of South Africa, and KCB. “This concentration of top-tier ratings highlights the region’s ability to build deeply trusted, customer-centric banking brands.”

Such a big profit as announced by Equity last week has for long been synonymous with Safaricom for years.

For example, in the 2021 financial year, Safaricom had posted a profit after tax of Sh68.7 billion, while it reported Sh67.5 billion in 2022, Sh52.5 billion in 2023 and Sh42.7 billion in 2024.

Technology subsidiary

For the half year of 2025, the telco reported Sh45.8 billion profit, and is due to close the financial year at the end of this month.

In 2024, Equity Group Holdings posted a profit after tax of Sh48.8 billion, but in the latest financials, the bank’s profit after tax grew by 55 per cent to Sh75.5 billion.

According to Mwangi, Equity is becoming bigger than just a bank due to its technology subsidiary. Perhaps this is where the bank is eating Safaricom’s lunch.

Equitel, the bank’s mobile virtual network operator, recorded 400.9 million transactions in 2025, growing from 308.1 million in 2024. This is in excess of Sh1.4 trillion in value of transactions.

The bank’s Equity Mobile and USSD platform recorded 174.3 million transactions in 2025 from 148.4 million, which is equivalent to Sh4.4 trillion, a growth from Sh3.2 trillion in 2024.

The digital services

“People always underestimate Equitel. That infrastructure has become very powerful. What we have seen is that people regard our infrastructure because it is embedded in the SIM card. It is not necessarily driven by the internet,” said Mwangi.

One of the major reasons for Equity surpassing its closest rival KCB, was the performance of its subsidiaries, with some markets posting triple-digit growth. 

Nearly half of the lender’s profits came from its regional units: Uganda’s profit jumped 500 per cent, Tanzania 125 per cent, and DR Congo 58 per cent.

This diversification has reaped fruit as it reduced reliance on a single market. 

Savings on interest expenses, possibly due to the consistent reduction in base lending rate in 2025, also catapulted Equity Group’s profit after tax in the period.

While a major drop of almost 10 per cent in non-performing loans (NPLs) among the bank’s corporate clients might have a role as well, it is the Sh15 billion savings made in interest expenses in the period that paint a clearer picture.

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During the period, the NPL ratio in the corporate sector reduced from 22.4 per cent to 13.6 per cent. When compared to other segments such as micro, small and medium enterprises (MSME), public sector institutions and retail, the corporate clientele had the largest drop in NPLs.

NPLs in the MSMEs, public sector institutions and retail were relatively the same in the year when compared to 2024.

For MSMEs, the NPL ratio stood at 13.2 per cent in 2025 from 13.5 per cent in the previous year. For public sector institutions, the figure went up to 2.5 per cent from 2.4 per cent, while in the retail segment, it increased to 6.6 per cent from 5.8 per cent.

Overall, the Group’s NPL ratio closed the year at 10.5 per cent from 12.2 in 2024.

In absolute figures, NPLs amounted to Sh124.7 billion in the first quarter of the year, but by the fourth quarter, they were Sh99.6 billion.

“The stock of NPLs reduced by Sh25 billion during the year, no wonder the NPL ratio moved from 14 per cent to 10 per cent,” Mwangi said.

While the Sh75.5 billion profit after tax has come as a shock to the industry, Mwangi explained that the bank had foreseen it, owing to how the management approaches performance with consistency.

He used the NPL ratio as an example.

“Look at the ratio, it is gradual, it is not a single loan. These are loans that are continuously being managed and collected,” he said.

From the financials, absolute NPLs stood at Sh109.7 billion in the fourth quarter of 2024, representing 12.2 per cent.

Mwangi noted that corporates are the headache when it comes to NPLs, indicating that the bank had 17 cases in court but managed to clear three, paving the way for collections.

He exuded confidence that with more favourable rulings in sight, NPLs in this segment will close the year at nine per cent from 13.6 per cent in 2025.

“The problem with corporates is that they defend themselves in court, but once judgments are made, you are able to have significant recoveries,” said Mwangi.

A look at the bank’s financials, however, shows much of the profit might have come through savings, particularly on interest expenses.

From the financials, interest income for the Group from loans and advances actually dropped from Sh107.7 billion in the year ended December 2024 to Sh105.9 billion last year. However, income from government securities improved by about Sh4 billion to Sh60.96 billion.

Critical savings

Other interest income went up to Sh827.1 million from Sh617.5 million. Total interest income for the Group then closed the year at Sh173.6 billion from Sh170.3 billion in 2024.

Where the business made critical savings that grew its profit is in interest expenses. Due to the base lending rate being reduced by 25 basis points virtually every review cycle in 2025, the bank also paid out less interest to its depositors, contributing to savings in excess of Sh14.8 billion.

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These savings correspond with the consistent drop in the base lending rate by the Central Bank of Kenya Monetary Policy Committee over the period. The year opened with a double-digit base lending rate of 11.25 per cent but closed at nine per cent. Consequently, in the period, total interest expenses stood at Sh46.7 billion compared to Sh61.6 billion in 2024 when the base lending rate hit a high of 13 per cent.

Interest expenses on customer deposits reduced to Sh35.7 billion in the year from Sh48.5 billion in 2024.

Interest expenses from deposits and placements from banking institutions dropped from Sh4.6 billion in 2024 to Sh1.4 billion in 2025, while other interest expenses grew slightly from Sh8.5 billion in 2024 to Sh9.6 billion.

“Interest offered by banks is not determined by individual banks but by the market. And the biggest player in the market when it comes to funding is the government. Nobody would give a bank a deposit at a lower rate than they are able to get from Treasury bills,” said Mwangi.

As interest income improved by just two per cent to Sh173.6 billion in the period, interest expense dropped 24 per cent. As such, net interest income grew 17 per cent to Sh126.9 billion from Sh108.7 billion.

Mwangi says the key to this performance was ensuring the cost of funding was kept low. This was done by being defensive.

Customers’ deposits are the main source of funding for banks. In the period, customer deposits grew by four per cent to Sh1.46 trillion while assets improved nine per cent to Sh1.97 trillion.

“The defensive strategy here was: How do we reduce the cost of funding? How do we improve the topline? And the topline was not about growth but efficiency. We reduced our cost of funding by 24 per cent,” he said.