ANNUAL REPORT and FINANCIAL STATEMENTS 2012 Equity Bank Group Headquarters, Nairobi
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2012 Equity Bank Group Headquarters, Nairobi. EQUITY BANK LIMITED AND SUBSIDIARIES | ANNUAL REPORT AND FINANCIAL STATEMENTS EQUITY BANK LIMITED AND SUBSIDIARIES | ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 FOR THE YEAR ENDED 31 DECEMBER 2012 Corporate Philosophies Equity Bank was founded as Equity Building Society (EBS) 2. Customer service as a key differentiator and ; in October 1984 and was originally a provider of mortgage 3. Robust risk management practices. financing for the majority of customers who fell into the low income population. The society’s logo, a modest house Undoubtedly the business model has been a huge success with a brown roof, resonates with its target market and prompting the development of a regional diversification their determination to make small but steady gains toward strategy. The model has already been replicated in Uganda, a better life, seeking security and advancement of their South Sudan, Rwanda and Tanzania by establishment of dreams. The vast majority of Africans have historically wholly owned subsidiaries. Equity’s longer term dream is been excluded from formal sources of capital, such as to become a Pan- African bank. banks, building societies and other regulated financial institutions. They therefore knew little about these resources, which makes financial literacy and education strategically important to Equity Bank’s growth. Also due OUR PURPOSE to its rural banking orientation, promotion of agribusiness We exist to transform the lives and livelihoods of our is a significant and strategic intervention by Equity. people socially and economically by availing them Having been declared technically insolvent in 1993, Equity’s modern, inclusive financial services that maximize their transformation into a rapidly growing retail/ microfinance opportunities. bank is widely considered to be an inspirational success OUR VISION story. One industry analyst voiced a popular opinion that “by providing banking services to the masses and generally To be the champion of the socio-economic prosperity of expanding its distribution channels and services, Equity the people of Africa. Bank will be a star performer.” By 2012, Equity Bank had OUR MISSION more than 7.8 million customers. The company’s vision is “to be the champion of the socio-economic prosperity of We offer inclusive, customer focused financial services the people of Africa”. While resounding for-profit, Equity that socially and economically empower our clients and retains a passionate commitment to empowering Africa’s other stakeholders. poor to improve their livelihoods and prospects for self sufficiency. Equity Bank has been severally voted the “best POSITIONING STATEMENT bank in retail banking” due to, among other factors, the Equity provides Inclusive Financial Services that transform customer dedication and talented management team. In livelihoods, give dignity and expand opportunities. addition to enjoying widespread recognition domestically, the company has attracted a lot of global accolades and OUR TAGLINE awards, as other developing countries in Africa and Asia Your Listening Caring Partner. seek to learn from Equity’s low margin, high-volume model. OUR MOTTO Growing Together In Trust. Equity has chosen to differentiate itself from the industry by specifically targeting mass banking. Being different by OUR VALUES offering affordable products and focusing on innovation is Professionalism part of our success. The bank has also focused on getting Integrity the basics of banking business right ie strict operational Creativity & Innovation performance measurements, robust risk management and high degree of automation. The banks business model Teamwork has been based on three focal areas: Unity of Purpose 1. Market research and innovation with the objective Respect & Dignity for Customers of moving financial access further down the income Effective Corporate Governance pyramid; 1 EQUITY BANK LIMITED AND SUBSIDIARIES | ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 Table Of Contents Corporate Philosophies 1 Notice of Ninth Annual General Meeting 3-4 Bank information 5 Chairman’s statement 6-9 CEO and Managing Director’s Statement 10-13 Financial Highlights 14-15 Key Achievments and Accolades 16-18 Statement of Corporate Social Responsibility 19-27 Board of Directors 28-35 The Executive Management 36-39 Report of the Directors 40 Statement of Corporate Governance 41-48 Statement of Directors’ Responsibilities 49 Report of the Independent auditors 50 Financial statements: Consolidated Income Statement 51 Consolidated Statement of Comprehensive Income 52 Consolidated Statement of Financial Position 53 Consolidated Statement of Changes in Equity 54 Statement of Changes in Equity 55 Consolidated Statement of Cash Flows 56 Notes to the Consolidated Financial Statements 57 - 118 Notes 119-120 2 EQUITY BANK LIMITED AND SUBSIDIARIES | ANNUAL REPORT AND FINANCIAL STATEMENTS EQUITY BANK LIMITED AND SUBSIDIARIES | ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 FOR THE YEAR ENDED 31 DECEMBER 2012 Notice of Ninth Annual General Meeting Notice is hereby given that the Ninth Annual General Meeting “That Articles 34A and 34B of the Articles of Association of the (AGM) of Equity Bank Limited will be held on Wednesday, 27th Company be and are hereby deleted in their entirety; Articles March, 2013 at Kenyatta International Conference Centre 104, 105, 126 and 138 of the Articles of Association of the (KICC) Nairobi, Kenya from 10.00 am to transact the following Company be and are hereby amended as indicated below; that business: Article 128 of the Articles of Association of the Company be and is hereby deleted in its entirety and replaced with a new article 1. The Company Secretary to read the notice convening as indicated below. the meeting. Proceedings of Directors 2. To receive, consider and if thought fit, adopt the Annual Report and Audited Financial Statements for Article 104 of the Company be and is hereby amended by the year ended 31st December 2012 together with the inserting the words “including by sending it by electronic means Chairman’s, Directors’ and Auditors’ reports thereon. to an address for the time being notified to the Company by the Director for purposes of communication with the Company 3. To approve a first and final dividend for the year ended (the “e-mail address”) or by making it available on an official 31st December 2012 of KES 1.25/- per ordinary share Company website or such other website as may be prescribed of KES 0.50/- each, subject to withholding tax, where for such purpose. Where a notice is made available on a website, applicable. directors shall be notified through electronic means of the fact that the notice has been made available on the website, the 4. To elect directors: address of the website and the place on the website where the document or information may be accessed and how it may be a) Mr. Benson Wairegi retires by rotation in accessed. Any notice served on a Director by electronic means accordance with Article 100 of the Company’s shall be deemed to have been received on the day it is sent and Articles of Association and being eligible, where it is made available on a website, it is deemed to have offers himself for re-election as a director; been received when it was made available on the website or on the date on which the notification of its being made available b) Mr. Fredrick Muchoki retires by rotation in on the website is deemed to have been received whichever is accordance with Article 100 of the Company’s later” immediately following the word “notices” the first time Articles of Association and being eligible, it appears in the fourteenth line and deleting the words “but offers himself for re-election as a director; notices to Directors not resident in Kenya shall be sent by international courier to the director’s usual place of business c) Mr. Temitope Lawani retires by rotation in and shall be deemed to have been received by the Director when accordance with Article 100 of the Company’s delivered to such address. It shall be necessary to give notice of Articles of Association and being eligible, a meeting of Directors to any Director for the time being absent offers himself for re-election as a director. from Kenya.” 5. To approve the remuneration of directors for the year Article 105 of the Articles of Association of the Company be and is ending 31st December 2013. hereby amended by inserting the following sentence “Directors may hold meetings by telephone, either by conference telephone connection(s) or by a series of telephone conversations or 6. To note that the auditors Messrs Ernst & Young, being by any communication equipment which allows all persons eligible and having expressed their willingness, will participating in the meeting to speak with and hear each other. continue in office in accordance with section 159 of the A Director shall be deemed to be present at any Board or Companies Act (Chapter 486 of the Laws of Kenya) and Committee meeting conducted by way of such communication to authorize the directors to fix their remuneration. equipment. A resolution passed at any meeting held in this manner, shall be valid and effectual as if it had been passed 7. As Special Business to consider, and if thought fit, to in a meeting at which Directors are physically present.” in the pass the following resolutions: second line after the first sentence and deleting