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Investment Recommendation Report: Equity

- May 10, 2019 - 0 comments

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We recommend a LONG TERM BUY on Equity Group Holdings. Currently, Equity is trading at a P/B of 1.56x (at a price of KES 39.15) compared to the average banking sector P/B of 0.90x as at 10th May 2019. We attribute the high P/B ratio to high growth expectations by investors. Equity has a high ROaE of 21.1% (the second highest in the banking sector) which is well above the industry average of 13.5%.

The current business model, hinged on technology, innovation and business diversification affirms the group’s competitive advantage in an industry adapting to the digitization strategy amidst the current regulatory challenges. Thus, we believe this business model will support growth in the long-term.

The group’s business model is tailored to address the emerging challenges in the banking sector. The model is hinged on the following focus areas:

  • Non funded income growth – to support net interest income
  • Regional diversification – to mitigate against regulatory risk
  • Strengthening liquidity and balance sheet agility
  • Treasury operations – to enhance treasury income
  • Asset quality (especially with tougher regulations in the horizon)
  • Innovation and digitization
  • Efficiencies and cost optimization


In a bid to increase their footprint across Africa, the bank is set to acquire four banks in Rwanda, Zambia, Tanzania and Mozambique.  Equity Bank expects to acquire 62% stake in Banque Populaire du Rwanda and full ownership of BancABC Zambia, BancABC Tanzania and BancABC Mozambique in a share- swap deal valued at KES 10.6 billion with London-listed Company Atlas Mara. This will expand the bank’s operations to 8 countries within the African Continent.

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