KenyaInvesting

James Mwangi's Stake in Equity Bank Clocks 100 Million Dollars

2014-09-02T21:36:00.000+03:00

Equity Bank’s Group Chief Executive Officer and Managing Director Dr. James Mwangi saw his stake in the bank valued at US$100 Million Dollars (Kshs. 8.9 Billion) when the stock touched a high of Kshs. 49.50 during Monday’s trading at the Nairobi Securities Exchange. The stock later eased to close at Kshs. 48.00. Dr. Mwangi has a direct stake of 3.45% in the bank, which then ups to 4.88% taking into consideration his stake in the bank’s Employee Share Ownership Program (ESOP) as well as a stake in British American Investments Company (Britam).

The Equity Bank (“The Bank”) share price is up 55% so far this year buoyed by their intention to break up the mobile banking hegemony held by Safaricom. Equity, through its subsidiary Finserve Africa Limited, was awarded a Mobile Virtual Network Operator licence that will enable it to ride on existing operators’ infrastructure to offer Telco services. The strategy, labelled ‘Equity 3.0’, will according to the bank help “continue our mission of furthering financial inclusion and innovative service offerings for all Kenyans by presenting our financial services offering on a single platform which will make banking services more accessible, flexible, convenient and affordable”

In comparison, when the bank listed by introduction at the Nairobi bourse in 2006, Dr. Mwangi’s stake stood at 7.32% worth Kshs. 464 Million at the time, putting into perspective the astonishing growth experienced by Equity. At Kshs. 49.50 and taking into account the 2007 bonus (2 for 1) and the 2009 split (10 for 1), the share has appreciated by 2000% from the introductory price of Kshs. 70 per share, giving a peek of the astronomical returns enjoyed by shareholders over the past 8 years.

It is such returns that have led key management and anchor shareholders to cut their stake and, with that, reaping billions of shillings in profits. Those who have exited the Top Ten Shareholders in the rush for profits include the family of the late poultry billionaire, Nelson Muguku, former CEO John Kagema Mwangi as well as current Chairman Peter Kahara Munga.

Dr. Mwangi himself banked Kshs. 1.5 Billion in a flurry of disposals between 2009 and 2011 once the 2 year lock-in period for senior management expired. Mwangi however argued that he was not seeking to divest from the company and that his sales were only enforced by the regulator which restricted executive directors from owning more than 5% of the banks they head.

In mid to late 2013, Dr. Mwangi bought shares on the open market for the first time. He bought 152,480 shares at an average of Kshs. 32. He had previously told The Business Daily in an interview: “Mine is a perpetual investment not for trading. I am a vision investor, so people should not be expecting me to be trading my shares.” In addition to the share sales, the Group MD has also reaped a billion shillings in dividends since the conversion of the Society into a bank.

Dr. Mwangi traces his roots from Kangema village. After losing his father at an early age, he sold fruit, charcoal and milk to assist his mother make ends meet. He states that he enjoyed working hard but he also knew that his education depended on it. He has previously reminisced “it gave me great experience of selling a product and providing a service at a tender age”. In an interview with Africa Business Magazine, Mwangi cites his late mother as the biggest influence of his life. She insisted that all her children, boy or girl, went to school. After excelling in his studies, he ultimately went to secondary school on a Government scholarship. He also counts Mandela as an idol as well as business moguls Jack Welch and Steve Jobs further crediting Microsoft founder Bill Gates with awakening his philanthropic side.

Indeed, Dr. Mwangi has developed a penchant for philanthropy even going to the extent of intimating that he sees himself moving towards full time philanthropy in the future. Last year, the former accountant made a contribution of Kshs. 100 Million to Meru University of Science and Technology while he is also the biggest individual sponsor to the African Leadership Academy in South Africa where he sits on the Global Advisory Council, with donations of Kshs. 30 Million. He used his position as CEO of Equity Bank to initiate the Equity Group Foundation (EGF) which donates 1% of revenue to social causes. EGF teamed up with The Mastercard Foundation and other partners in 2010 to start the Wings to Fly Program which is an initiative to provide education and leadership training to academically gifted yet economically and socially marginalized young Kenyans.

Dr. Mwangi has won a raft of awards alongside the bank for his role in the transformation of Equity and the industry in Kenya. Most notable include:
• 2007 Global Vision Award in Microfinance which he shared with Grameen Bank’s head, Muhammad Yunus, the 2006 Bangladeshi Nobel Peace Prize winner
• 2012 Ernst and Young World Entrepreneur of the Year
• 2012 Forbes Africa Person of the Year
• 2013 Africa Investor African Business Leader of the Year

In addition to being the Chairman of the Kenya Vision 2030 Delivery Board, Mwangi also advises the United Nations Environmental Program (UNEP), The Bill and Melinda Gates Foundation, The Group of Eight (G8) leaders, as well as the Clinton Global Initiative on matters pertaining to banking the poor.

Among Dr. Mwangi’s other investments include a Kshs. 2 Billion stake in Britam and the 5-Star Enashipai Resort and Spa in Naivasha. His personal fortune is estimated to be US$300 Million Dollars.

NSE BANKING SECTOR REPORT - THE TOP 5

2012-08-16T23:28:00.007+03:00

With all top 5 banks now having released their 2012 half year results, I did a review of their performance across different banking and business indicators.

I also analysed their performance against the entire banking industry’s Half Year performance

The total banking sector deposit accounts was 14,893,628 from 12.8 Million, a rise of 16.4%, with Equity Bank (Equity) having 7.8 Million accounts, giving it a market share of 52.4%, up from 49% the previous year

Profitability

Standard Chartered (SCBK) leapt past Co-operative Bank (Co-op) and Barclays (BBK) in the pre-tax profitability rankings. SCBK’s profits soared 87.5% to Kshs. 6.5 Billion from Kshs. 3.47 Billion.

Kenya Commercial Bank (KCB) snatched top position from Equity with an impressive 48% growth in pre-tax earnings to Kshs. 8.5 Billion.

Co-op was the least profitable among the top 5 banks with 5 Billion after profits rose 20.8% to Kshs. 5 Billion

Pre-tax profitability for the total banking industry for the half year period to 30^th June rose 30.4% to Kshs. 53.2 Billion

The Top 5 Listed Banks (Henceforth referred to as ‘The Top 5’) though grew at a much faster pace than the industry as a whole. Profitability grew 38% from Kshs. 24.6 Billion to Kshs. 33.95 Billion.

This figure represents 63.8% of all banking sector profits. This is a rise from 60.28% in June 2011 and 56.6% as at June 2010. Such is the dominance of The Top 5 that one is left wondering whether they will account for two thirds of total banking sector profits but this time next year

Customer Deposits

Total banking deposit base increased by 18.6% to Kshs. 1.66 Trillion from Kshs. 1.4 Trillion

KCB with Kshs. 278.5 Billion remains well ahead of other banks in Customer Deposits. Its deposits which grew also grew the fastest (29.11%) among The Top 5, are double that of both Barclays and SCBK.

BBK’s customer deposits declined by nearly Kshs. 6 Billion or 4.6% to Kshs. 122.5 Billion from Kshs. 128.43 Billion. It is the second half in a row that Barclays has reported a drop in deposits as they had a 1.6% reduction for the period ending June 2011

Cumulatively, The Top 5 had deposits of Kshs. 836 Billion, up from Kshs. 708 Billion. The Top 5’s market share however declined slightly to 50.4% from 50.6% of total banking sector deposits. The figure for H1 2010 was 51.4%

Net Loans and Advances

Barclays managed to grow their loan book by 10% which was an improvement from the previous year’s flat growth. However, with a loan book of Kshs. 101.1 Billion, they now possess the smallest loan book among the top 5 as fellow multinational Stanchart grew advances 24.4% to Kshs. 104 Billion

KCB has a loan book of Kshs. 202 Billion, nearly Kshs. 80 Billion more than Equity which grew advances to Kshs. 124.5 Billion, a rise of 27.4% from the previous year

Overall, the loan book of The Top 5 grew by 100 Billion to Kshs. 644 Billion.

A quarter-on-quarter analysis shows that the 2^nd Quarter the tough macro-economic environment had started taking its toll on the banks with only single digit growth in net loans and advances. The Top 5 as a whole grew the loan book by 2.8% in Q2 2012 from Q1 2012

	LOAN BOOK Q1 2012 Kshs.	LOAN BOOK Q2 2012 Kshs.	% CHANGE
KENYA COMMERCIAL BANK GROUP	195.3 BILLION	202 BILLION	+3.5%
EQUITY BANK GROUP	121.1 BILLION	124.5 BILLION	+2.8%
STANDARD CHARTERED BANK OF KENYA	96.5 BILLION	104.1 BILLION	+7.8%
BARCLAYS BANK OF KENYA	100.3 BILLION	101.1 BILLION	+0.8%
THE CO-OPERATIVE BANK OF KENYA	113.6 BILLION	112.6 BILLION	-0.9%

Quality of The Loan Book

Net non-performing loans (NNPL) for The Top 5 went down by 3% to 10.8 Billion.

The quality of the loan book, measured as a proportion of net non performing loans to net loans and advances, improved to 1.67% from 2.04%. As at June 2010, net non-performing loans consisted of 3.15% of the loan book.

The Central Bank of Kenya (CBK) registered the first Credit Referencing Bureau (CRB) in Kenya, CRB Africa in February 2010 in order for financial institutions to share credit history. A second CRB, Metropol CRB was registered in April 2011

	NNPL/NET LOANS H1 2011	NNPL/NET LOANS H1 2012
KENYA COMMERCIAL BANK GROUP	3.5%	2.47%
EQUITY BANK GROUP	2.02%	0.86%
STANDARD CHARTERED BANK OF KENYA	0.883%	1.53%
BARCLAYS BANK OF KENYA	0.879%	0.96%
THE CO-OPERATIVE BANK OF KENYA	1.53%	1.91%

Balance Sheet

Top 5 total assets sailed past the trillion shilling mark to stand at Kshs. 1.1 Trillion, up 16.7% from the previous year, keeping up pace with the entire banking sector which grew 15.8% to Kshs. 2.2 Trillion from Kshs. 1.9 Trillion.

KCB, with an asset base of nearly Kshs. 350 Billion, comes out top

BBK’s total assets decreased by 4.5% to Kshs. 168.9 Billion

SCBK, Co-op, and Equity saw their total assets increase by 22.8%, 7.8%, and 28.3% to Kshs. 188 Billion, Kshs. 177 Billion and Kshs. 220 Billion respectively

The Top 5 have maintained their 50% holding total banking sector assets

Subsidiaries

All of KCB’s regional units with the exception of Burundi (opened on 8^th May 2012 and expected to break even in 2 years) have broken even. KCB’s operations outside Kenya contributed Kshs. 628 Million in pre-tax profits, nearly double the Kshs. 320 Million they made the previous years.

Equity’s subsidiaries made 741 Million in profits compared to Kshs. 628 Million the previous year. Equity commenced operations in Rwanda in October 2011 and now has 8 Branches (KCB - 10). In February of this year, the bank opened a Tanzanian subsidiary. They now have 4 branches in the country (KCB - 11)

Meanwhile, the likes of Kingdom Securities, Co-op Trust Investment Services and Co-op Consultancy Limited contributed Kshs. 134 Million to Co-op’s profits, down from Kshs. 153 Million over the corresponding period last year. Co-op has recently launched a bank in South Sudan

Interest Expenses

The half saw a very significant increase in the cost of funds as aggregate interest expenses for The Top 5 catapulted by 332% as banks clamoured for deposits during a high inflation period.

The rise was much higher than the increase in Total Interest Income which rose by 72%. Interest expenses rose by at least 300% in 4 of the 5 banks with KCB seeing a 400% rise. Equity’s interest expenses rose at the slowest rate, but this still translated to a 240% jump.

Banks will be hoping this trend reverses in the 2^nd Half of the year

Operational Efficiency

There was a drop in the Cost:Income ratio in 4 of The Top 5. Stanchart’s drop was the steepest and now stands at 40.88%, the lowest among the group.

Equity’s Cost:Income ratio meanwhile rose to 56.96% from 55.63%

Agency Banking

Nearly a quarter of banks in the country have now undertaken agency banking. As at the end of June 2012, 10 banks had contracted 12,054 agents compared to 6 banks that had contracted 6,513 agents during the first half of 2011. This is an 85% rise in the number of agents compared to the branch network by 94 branches or 8.5% to 1,196.

During its half year results presentation, Equity Bank announced that it had more than doubled its number of agents to 5,004 from 2300. Their agents now handle 24% of bank transactions, up from 8%, with the C.E.O Dr. James Mwangi projecting that agencies will overtake branches in terms of transactions and volume of money, though he did not give a specific timeframe.

CBK said that at the end of June, the agency network facilitated 18.7 Million transactions valued at Kshs. 93 Billion

The Kenyan Economy

Monetary tightening over the past year led to the Kenyan Shilling strengthening to 87.75 to 83.51 as at the end of June 2012. A drop in crude prices to $95.65 from $107.95 coupled with good rains resulting in the reduction of staple agricultural commodities led to inflation during the period eased from 14.49% in June 2011 to 10.05% in June 2012. This subsequently fell to 7.74%

This prompted CBK to cut the Central Bank Rate (CBR) to 16.5% from 18%. The Governments cost of borrowing also reduced during the period. The 91 Day Treasury Bill rate is now in the 12% range. In January 2012, it was past the 20% mark. All eyes will be on CBK’s Monetary Policy Committee when they meet on 5^th September with anticipation whether we will see a further cut in the CBR.

Granted, risks to the economy still exist. Since June 2012, the price of crude has rallied past the $100 mark. Indeed, when announcing the latest fuel prices, the Energy Regulatory Commission (ERC) warned that rising oil prices might lead to an increase in pump prices in the next review. Super petrol is now at Kshs. 106.48 from a high of Kshs. 121.13 in May

Sectors such as horticulture and tourism still face uncertainties owing to the Euro Crisis. The tourism industry is being hit by a double blow as it is also reeling from travel advisories against travelling to Kenya were issued in light of recent security threats that the country is facing

Kenya’s economy grew by 3.5% in the first quarter, down from 5.1% a year earlier. This was the slowest growth since 2008. Fitch recently affirmed the country’s Credit rating at B+ with a stable outlook. Kenya doubled its planned Eurobond to 1 Billion Dollars with a tenor of 10 years set for the 2013/2014 fiscal year.

Valuations

	Return on Equity	Return on Assets	Price/Book Ratio	Market Capitalisation Kshs.	Forward Price:Earnings Ratio
Kenya Commercial Bank	26.2%	3.48%	1.59	73.7 BILLION	6.1
Equity Bank	30.18%	4.9%	2.2	79.6 BILLION	7.4
Standard Chartered Bank of Kenya	38.12%	4.82%	2.36	56.3 BILLION	6.2
Barclays Bank of Kenya	33.35%	5.05%	2.96	75.8 BILLION	8.8
Co-operative Bank of Kenya	30.96%	4.5%	1.47	38.4 BILLION	5.7

Note: All figures were arrived at using closing day data on Wednesday 15^th August 2012. Price/Book Ratio figures include intangible assets

New Developments and Outlook for the Second Half

KCB’s rolled out a mobile banking platform (KCB Mobi) which is not limited to any network. The bank also launched Diaspora Banking intended to serve East Africans working and living in the diaspora.

A lot of players in the banking sector have announced plans for raising capital. Stanchart has already begun the process of raising Kshs. 3.2 Billion in a rights issue. Several banks will be going through similar motions in the months to come.

Diamond Trust Bank and NIC Bank are seeking to raise Kshs. 1.81 Billion and Kshs. 2.07 Billion respectively. Consolidated Bank earlier managed to raise Kshs. 1.7 Billion in a bond offering

Banks are also positioning themselves to benefit from the activities in Kenya’s nascent hydrocarbon industry. KCB has indicated that the recent oil and gas discoveries may boost earnings by as much as 30%. Stanchart was also reported to have scooped the account for Tullow Oil which is prospecting for oil in the country

Co-op Bank is now the 4^th Kenyan bank to have operations in South Sudan, a move which makes it its first foray outside Kenya. Co-op will take a 51% stake in the subsidiary in a joint venture with the Government of South Sudan (G.O.S.S). The bank plans to open 5 branches in Juba by December 2012. G.O.S.S will sell 11% of its stake after 3 years. According to Central Bank of Kenya data, South Sudan accounted for 42% of the Kshs. 2.3 Billion shillings profit that was made by Kenyan banks outside Kenya.

Tabular Summaries of The Top 5’s Half Year

	KENYA COMMERCIAL BANK GROUP	EQUITY BANK GROUP	STANDARD CHARTERED BANK OF KENYA	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA
TOTAL ASSETS	349.3 BILLION	220 BILLION	188.3 BILLION	168.9 BILLION	177.7 BILLION
NET LOANS AND ADVANCES	202.1 BILLION	124.5 BILLION	104 BILLION	101.1 BILLION	112.6 BILLION
CUSTOMER DEPOSITS	278.5 BILLION	151 BILLION	138.2 BILLION	122.5 BILLION	145.7 BILLION
LOAN:DEPOSIT RATIO	72.5%	82.4%	75.3%	82.5%	77.3%
TOTAL INTEREST INCOME	20.6 BILLION	14.9 BILLION	9.9 BILLION	10.6 BILLION	13 BILLION
TOTAL INTEREST EXPENSE	6.3 BILLION	3.6 BILLION	2.6 BILLION	1.7 BILLION	5.5 BILLION
NET INTEREST INCOME	14.3 BILLION	11.3 BILLION	7.3 BILLION	9 BILLION	7.4 BILLION
TOTAL OPERATING INCOME	21.9 BILLION	17.6 BILLION	11 BILLION	13.7 BILLION	11.5 BILLION
TOTAL OPERATING EXPENSE	13.4 BILLION	10 BILLION	4.5 BILLION	7.4 BILLION	6.6 BILLION
NET NON PERFORMING LOANS	5 BILLION	1.1 BILLION	1.6 BILLION	971 MILLION	2.2 BILLION
PROFIT BEFORE TAX	8.5 BILLION	7.6 BILLION	6.5 BILLION	6.3 BILLION	5 BILLION
PROFIT AFTER TAX	6.1 BILLION	5.4 BILLION	4.5 BILLION	4.3 BILLION	4 BILLION

	KENYA COMMERCIAL BANK GROUP	EQUITY BANK GROUP	STANDARD CHARTERED BANK OF KENYA	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA
TOTAL ASSETS	+24.9%	+28.3%	+22.8%	-4.5%	+7.8%
NET LOANS AND ADVANCES	+15.3%	+27.4%	+24.4%	+10.1%	+18.4%
CUSTOMER DEPOSITS	+29.1%	+21.9	+26.5%	-4.6%	+11.5%
LOAN:DEPOSIT RATIO	-8.7%	+3.6%	-1.3%	+11%	+4.5%
TOTAL INTEREST INCOME	+136.9%	+78.8%	+96.7%	+36.2%	+78.4%
TOTAL INTEREST EXPENSE	+404.9%	+242.8%	+397.6%	+301.5%	+317.8%
NET INTEREST INCOME	+35.9%	+55.2%	+61.9%	+21.4%	+25%
TOTAL OPERATING INCOME	+29.8%	+33.5%	+54.2%	+9.7%	+23.1%
TOTAL OPERATING EXPENSE	+20.3%	+36.7%	+22.7%	+3.5%	+24.8%
NET NON PERFORMING LOANS	-18.7%	-45.6%	+115.8%	+20.3%	+47.9%
PROFIT BEFORE TAX	+48.2%	+29.3%	+87.5%	+18.1%	+20.8%
PROFIT AFTER TAX	+50%	+14%	+81.5%	+17.2%	+22%

Disclaimer

The information in this report originates from public sources that are deemed reliable. This document does not constitute an offer, or the solicitation of an offer, for the sale or purchase of any security. Whilst every care has been taken in preparing this document, no representation, warranty or undertaking is given and no responsibility or liability is accepted by @kenyainvestor as to the accuracy of the information contained and opinions expressed herein.

NSE BANKING SECTOR REPORT - THE TOP 5

2012-08-16T23:28:00.005+03:00

With all top 5 banks now having released their 2012 half year results, I did a review of their performance across different banking and business indicators.

I also analysed their performance against the entire banking industry’s Half Year performance

Profitability

Standard Chartered (SCBK) leapt past Co-operative Bank (Co-op) and Barclays (BBK) in the pre-tax profitability rankings. SCBK’s profits soared 87.5% to Kshs. 6.5 Billion from Kshs. 3.47 Billion.

Kenya Commercial Bank (KCB) snatched top position from Equity with an impressive 48% growth in pre-tax earnings to Kshs. 8.5 Billion.

Co-op was the least profitable among the top 5 banks with 5 Billion after profits rose 20.8% to Kshs. 5 Billion

Pre-tax profitability for the total banking industry for the half year period to 30^th June rose 30.4% to Kshs. 53.2 Billion

Customer Deposits

Total banking deposit base increased by 18.6% to Kshs. 1.66 Trillion from Kshs. 1.4 Trillion

KCB with Kshs. 278.5 Billion remains well ahead of other banks in Customer Deposits. Its deposits which grew also grew the fastest (29.11%) among The Top 5, are double that of both Barclays and SCBK.

Net Loans and Advances

KCB has a loan book of Kshs. 202 Billion, nearly Kshs. 80 Billion more than Equity which grew advances to Kshs. 124.5 Billion, a rise of 27.4% from the previous year

Overall, the loan book of The Top 5 grew by 100 Billion to Kshs. 644 Billion.

	LOAN BOOK Q1 2012 Kshs.	LOAN BOOK Q2 2012 Kshs.	% CHANGE
KENYA COMMERCIAL BANK GROUP	195.3 BILLION	202 BILLION	+3.5%
EQUITY BANK GROUP	121.1 BILLION	124.5 BILLION	+2.8%
STANDARD CHARTERED BANK OF KENYA	96.5 BILLION	104.1 BILLION	+7.8%
BARCLAYS BANK OF KENYA	100.3 BILLION	101.1 BILLION	+0.8%
THE CO-OPERATIVE BANK OF KENYA	113.6 BILLION	112.6 BILLION	-0.9%

Quality of The Loan Book

Net non-performing loans (NNPL) for The Top 5 went down by 3% to 10.8 Billion.

	NNPL/NET LOANS H1 2011	NNPL/NET LOANS H1 2012
KENYA COMMERCIAL BANK GROUP	3.5%	2.47%
EQUITY BANK GROUP	2.02%	0.86%
STANDARD CHARTERED BANK OF KENYA	0.883%	1.53%
BARCLAYS BANK OF KENYA	0.879%	0.96%
THE CO-OPERATIVE BANK OF KENYA	1.53%	1.91%

Balance Sheet

KCB, with an asset base of nearly Kshs. 350 Billion, comes out top

BBK’s total assets decreased by 4.5% to Kshs. 168.9 Billion

SCBK, Co-op, and Equity saw their total assets increase by 22.8%, 7.8%, and 28.3% to Kshs. 188 Billion, Kshs. 177 Billion and Kshs. 220 Billion respectively

The Top 5 have maintained their 50% holding total banking sector assets

Subsidiaries

Interest Expenses

The half saw a very significant increase in the cost of funds as aggregate interest expenses for The Top 5 catapulted by 332% as banks clamoured for deposits during a high inflation period.

Banks will be hoping this trend reverses in the 2^nd Half of the year

Operational Efficiency

There was a drop in the Cost:Income ratio in 4 of The Top 5. Stanchart’s drop was the steepest and now stands at 40.88%, the lowest among the group.

Equity’s Cost:Income ratio meanwhile rose to 56.96% from 55.63%

Agency Banking

CBK said that at the end of June, the agency network facilitated 18.7 Million transactions valued at Kshs. 93 Billion

The Kenyan Economy

Valuations

	Return on Equity	Return on Assets	Price/Book Ratio	Market Capitalisation Kshs.	Forward Price:Earnings Ratio
Kenya Commercial Bank	26.2%	3.48%	1.59	73.7 BILLION	6.1
Equity Bank	30.18%	4.9%	2.2	79.6 BILLION	7.4
Standard Chartered Bank of Kenya	38.12%	4.82%	2.36	56.3 BILLION	6.2
Barclays Bank of Kenya	33.35%	5.05%	2.96	75.8 BILLION	8.8
Co-operative Bank of Kenya	30.96%	4.5%	1.47	38.4 BILLION	5.7

Note: All figures were arrived at using closing day data on Wednesday 15^th August 2012. Price/Book Ratio figures include intangible assets

New Developments and Outlook for the Second Half

Diamond Trust Bank and NIC Bank are seeking to raise Kshs. 1.81 Billion and Kshs. 2.07 Billion respectively. Consolidated Bank earlier managed to raise Kshs. 1.7 Billion in a bond offering

Tabular Summaries of The Top 5’s Half Year

	KENYA COMMERCIAL BANK GROUP	EQUITY BANK GROUP	STANDARD CHARTERED BANK OF KENYA	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA
TOTAL ASSETS	349.3 BILLION	220 BILLION	188.3 BILLION	168.9 BILLION	177.7 BILLION
NET LOANS AND ADVANCES	202.1 BILLION	124.5 BILLION	104 BILLION	101.1 BILLION	112.6 BILLION
CUSTOMER DEPOSITS	278.5 BILLION	151 BILLION	138.2 BILLION	122.5 BILLION	145.7 BILLION
LOAN:DEPOSIT RATIO	72.5%	82.4%	75.3%	82.5%	77.3%
TOTAL INTEREST INCOME	20.6 BILLION	14.9 BILLION	9.9 BILLION	10.6 BILLION	13 BILLION
TOTAL INTEREST EXPENSE	6.3 BILLION	3.6 BILLION	2.6 BILLION	1.7 BILLION	5.5 BILLION
NET INTEREST INCOME	14.3 BILLION	11.3 BILLION	7.3 BILLION	9 BILLION	7.4 BILLION
TOTAL OPERATING INCOME	21.9 BILLION	17.6 BILLION	11 BILLION	13.7 BILLION	11.5 BILLION
TOTAL OPERATING EXPENSE	13.4 BILLION	10 BILLION	4.5 BILLION	7.4 BILLION	6.6 BILLION
NET NON PERFORMING LOANS	5 BILLION	1.1 BILLION	1.6 BILLION	971 MILLION	2.2 BILLION
PROFIT BEFORE TAX	8.5 BILLION	7.6 BILLION	6.5 BILLION	6.3 BILLION	5 BILLION
PROFIT AFTER TAX	6.1 BILLION	5.4 BILLION	4.5 BILLION	4.3 BILLION	4 BILLION

	KENYA COMMERCIAL BANK GROUP	EQUITY BANK GROUP	STANDARD CHARTERED BANK OF KENYA	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA
TOTAL ASSETS	+24.9%	+28.3%	+22.8%	-4.5%	+7.8%
NET LOANS AND ADVANCES	+15.3%	+27.4%	+24.4%	+10.1%	+18.4%
CUSTOMER DEPOSITS	+29.1%	+21.9	+26.5%	-4.6%	+11.5%
LOAN:DEPOSIT RATIO	-8.7%	+3.6%	-1.3%	+11%	+4.5%
TOTAL INTEREST INCOME	+136.9%	+78.8%	+96.7%	+36.2%	+78.4%
TOTAL INTEREST EXPENSE	+404.9%	+242.8%	+397.6%	+301.5%	+317.8%
NET INTEREST INCOME	+35.9%	+55.2%	+61.9%	+21.4%	+25%
TOTAL OPERATING INCOME	+29.8%	+33.5%	+54.2%	+9.7%	+23.1%
TOTAL OPERATING EXPENSE	+20.3%	+36.7%	+22.7%	+3.5%	+24.8%
NET NON PERFORMING LOANS	-18.7%	-45.6%	+115.8%	+20.3%	+47.9%
PROFIT BEFORE TAX	+48.2%	+29.3%	+87.5%	+18.1%	+20.8%
PROFIT AFTER TAX	+50%	+14%	+81.5%	+17.2%	+22%

Disclaimer

NSE BANKING SECTOR REPORT - THE TOP 5

2012-08-16T23:28:00.003+03:00

With all top 5 banks now having released their 2012 half year results, I did a review of their performance across different banking and business indicators.

I also analysed their performance against the entire banking industry’s Half Year performance

Profitability

Standard Chartered (SCBK) leapt past Co-operative Bank (Co-op) and Barclays (BBK) in the pre-tax profitability rankings. SCBK’s profits soared 87.5% to Kshs. 6.5 Billion from Kshs. 3.47 Billion.

Kenya Commercial Bank (KCB) snatched top position from Equity with an impressive 48% growth in pre-tax earnings to Kshs. 8.5 Billion.

Co-op was the least profitable among the top 5 banks with 5 Billion after profits rose 20.8% to Kshs. 5 Billion

Pre-tax profitability for the total banking industry for the half year period to 30^th June rose 30.4% to Kshs. 53.2 Billion

Customer Deposits

Total banking deposit base increased by 18.6% to Kshs. 1.66 Trillion from Kshs. 1.4 Trillion

KCB with Kshs. 278.5 Billion remains well ahead of other banks in Customer Deposits. Its deposits which grew also grew the fastest (29.11%) among The Top 5, are double that of both Barclays and SCBK.

Net Loans and Advances

KCB has a loan book of Kshs. 202 Billion, nearly Kshs. 80 Billion more than Equity which grew advances to Kshs. 124.5 Billion, a rise of 27.4% from the previous year

Overall, the loan book of The Top 5 grew by 100 Billion to Kshs. 644 Billion.

	LOAN BOOK Q1 2012 Kshs.	LOAN BOOK Q2 2012 Kshs.	% CHANGE
KENYA COMMERCIAL BANK GROUP	195.3 BILLION	202 BILLION	+3.5%
EQUITY BANK GROUP	121.1 BILLION	124.5 BILLION	+2.8%
STANDARD CHARTERED BANK OF KENYA	96.5 BILLION	104.1 BILLION	+7.8%
BARCLAYS BANK OF KENYA	100.3 BILLION	101.1 BILLION	+0.8%
THE CO-OPERATIVE BANK OF KENYA	113.6 BILLION	112.6 BILLION	-0.9%

Quality of The Loan Book

Net non-performing loans (NNPL) for The Top 5 went down by 3% to 10.8 Billion.

	NNPL/NET LOANS H1 2011	NNPL/NET LOANS H1 2012
KENYA COMMERCIAL BANK GROUP	3.5%	2.47%
EQUITY BANK GROUP	2.02%	0.86%
STANDARD CHARTERED BANK OF KENYA	0.883%	1.53%
BARCLAYS BANK OF KENYA	0.879%	0.96%
THE CO-OPERATIVE BANK OF KENYA	1.53%	1.91%

Balance Sheet

KCB, with an asset base of nearly Kshs. 350 Billion, comes out top

BBK’s total assets decreased by 4.5% to Kshs. 168.9 Billion

SCBK, Co-op, and Equity saw their total assets increase by 22.8%, 7.8%, and 28.3% to Kshs. 188 Billion, Kshs. 177 Billion and Kshs. 220 Billion respectively

The Top 5 have maintained their 50% holding total banking sector assets

Subsidiaries

Interest Expenses

The half saw a very significant increase in the cost of funds as aggregate interest expenses for The Top 5 catapulted by 332% as banks clamoured for deposits during a high inflation period.

Banks will be hoping this trend reverses in the 2^nd Half of the year

Operational Efficiency

There was a drop in the Cost:Income ratio in 4 of The Top 5. Stanchart’s drop was the steepest and now stands at 40.88%, the lowest among the group.

Equity’s Cost:Income ratio meanwhile rose to 56.96% from 55.63%

Agency Banking

CBK said that at the end of June, the agency network facilitated 18.7 Million transactions valued at Kshs. 93 Billion

The Kenyan Economy

Valuations

	Return on Equity	Return on Assets	Price/Book Ratio	Market Capitalisation Kshs.	Forward Price:Earnings Ratio
Kenya Commercial Bank	26.2%	3.48%	1.59	73.7 BILLION	6.1
Equity Bank	30.18%	4.9%	2.2	79.6 BILLION	7.4
Standard Chartered Bank of Kenya	38.12%	4.82%	2.36	56.3 BILLION	6.2
Barclays Bank of Kenya	33.35%	5.05%	2.96	75.8 BILLION	8.8
Co-operative Bank of Kenya	30.96%	4.5%	1.47	38.4 BILLION	5.7

Note: All figures were arrived at using closing day data on Wednesday 15^th August 2012. Price/Book Ratio figures include intangible assets

New Developments and Outlook for the Second Half

Diamond Trust Bank and NIC Bank are seeking to raise Kshs. 1.81 Billion and Kshs. 2.07 Billion respectively. Consolidated Bank earlier managed to raise Kshs. 1.7 Billion in a bond offering

Tabular Summaries of The Top 5’s Half Year

	KENYA COMMERCIAL BANK GROUP	EQUITY BANK GROUP	STANDARD CHARTERED BANK OF KENYA	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA
TOTAL ASSETS	349.3 BILLION	220 BILLION	188.3 BILLION	168.9 BILLION	177.7 BILLION
NET LOANS AND ADVANCES	202.1 BILLION	124.5 BILLION	104 BILLION	101.1 BILLION	112.6 BILLION
CUSTOMER DEPOSITS	278.5 BILLION	151 BILLION	138.2 BILLION	122.5 BILLION	145.7 BILLION
LOAN:DEPOSIT RATIO	72.5%	82.4%	75.3%	82.5%	77.3%
TOTAL INTEREST INCOME	20.6 BILLION	14.9 BILLION	9.9 BILLION	10.6 BILLION	13 BILLION
TOTAL INTEREST EXPENSE	6.3 BILLION	3.6 BILLION	2.6 BILLION	1.7 BILLION	5.5 BILLION
NET INTEREST INCOME	14.3 BILLION	11.3 BILLION	7.3 BILLION	9 BILLION	7.4 BILLION
TOTAL OPERATING INCOME	21.9 BILLION	17.6 BILLION	11 BILLION	13.7 BILLION	11.5 BILLION
TOTAL OPERATING EXPENSE	13.4 BILLION	10 BILLION	4.5 BILLION	7.4 BILLION	6.6 BILLION
NET NON PERFORMING LOANS	5 BILLION	1.1 BILLION	1.6 BILLION	971 MILLION	2.2 BILLION
PROFIT BEFORE TAX	8.5 BILLION	7.6 BILLION	6.5 BILLION	6.3 BILLION	5 BILLION
PROFIT AFTER TAX	6.1 BILLION	5.4 BILLION	4.5 BILLION	4.3 BILLION	4 BILLION

	KENYA COMMERCIAL BANK GROUP	EQUITY BANK GROUP	STANDARD CHARTERED BANK OF KENYA	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA
TOTAL ASSETS	+24.9%	+28.3%	+22.8%	-4.5%	+7.8%
NET LOANS AND ADVANCES	+15.3%	+27.4%	+24.4%	+10.1%	+18.4%
CUSTOMER DEPOSITS	+29.1%	+21.9	+26.5%	-4.6%	+11.5%
LOAN:DEPOSIT RATIO	-8.7%	+3.6%	-1.3%	+11%	+4.5%
TOTAL INTEREST INCOME	+136.9%	+78.8%	+96.7%	+36.2%	+78.4%
TOTAL INTEREST EXPENSE	+404.9%	+242.8%	+397.6%	+301.5%	+317.8%
NET INTEREST INCOME	+35.9%	+55.2%	+61.9%	+21.4%	+25%
TOTAL OPERATING INCOME	+29.8%	+33.5%	+54.2%	+9.7%	+23.1%
TOTAL OPERATING EXPENSE	+20.3%	+36.7%	+22.7%	+3.5%	+24.8%
NET NON PERFORMING LOANS	-18.7%	-45.6%	+115.8%	+20.3%	+47.9%
PROFIT BEFORE TAX	+48.2%	+29.3%	+87.5%	+18.1%	+20.8%
PROFIT AFTER TAX	+50%	+14%	+81.5%	+17.2%	+22%

Disclaimer

TRANSCENTURY LIMITED REVIEW

2012-01-17T23:07:00.001+03:00

TransCentury Limited’s (TCL) shares touched a new low of Kshs. 23.00 in trading at the Nairobi Securities Exchange (NSE) on Tuesday January 17^th 2012 after trading 1,800 shares.

The share eventually closed at Kshs. 23.50. This represents a 53% drop from the introductory price of Kshs. 50.00 on July 14^th 2011. Soon after the listing, the share touched a high of Kshs. 60.00, but has been on a swift downward spiral since then.

No doubt the company’s decision to go on with the listing at a Price to Earnings ratio of 38 due to what they termed “good prospects” while other NSE-listed investment companies were going at much lower multiples, and granted, also had good if not greater prospects, aided in the drop.

In light of this development, I undertook a review of the company and its operations

Through its various divisions, the company holds stakes in different companies:

Consumer Division

Chai Bora: This subsidiary of TCL is a market leader in blending, packaging and marketing tea in Tanzania, controlling 60% of the market

Power Infrastructure Division

This division is the mainstay of the company and indeed contributed 81% of turnover in 2010.

East African Cables (Owns 63% stake): Acquired in 2004 from Sameer Group. In its Half Year 2011 results, the cable maker rebounded from a 57 Million loss to post a 172.3 Million in Profit After Tax (PAT)

Kewberg Cables (100%): Acquired in 2007

Tanelec Limited (70%): Tanzanian transformer manufacturer. Acquired stake in 2007

Cableres du Congo (100%): Acquired in 2010

Special Engineering Division

Avery East Africa: Incorporated in 1970, it focused on the supply, manufacture, maintenance and repair of weighting scales. It has though diversified into dealing with inkjet coding equipment and has now ventured into the energy sector where the company is actively supplying power generation equipment

In December 2011 during an Extraordinary General Meeting, TCL shareholders approved an investment by the company in Civicon Group Limited and its affiliates. Civicon deals in projects involving heavy transport, cranage, piping, tanks, steel erections and road building across Africa and the Middle East

This, the Chief Executive Officer, Gachao Kiuna, expects to even out revenue across the divisions.

Transport Infrastructure Division

Through this division TCL owns 34% of Rift Valley Railways Investments (RVRI) which has a 25 year concession to operate exclusively railway services in Kenya and Uganda

In July 2011, Citadel Capital, which is the majority shareholder in RVR, reported that RVRI achieved a positive EBITDA for the first time since it invested in it. Citadel said that for the month of June 2011, RVRI had an EBITDA of Kshs. 57.28 Million

After receiving a financing package from a consortium of lenders, RVRI embarked on a $287 Million capital expenditure to increase volumes and revenues significantly over the next 5 years.

TransCentury also has holdings in several financial services firms, chief of which is a 10.7% stake in Development Bank of Kenya. Other investments include an array of international Private Equity firms

TCL plans to join the Real Estate bandwagon. It owns 100% of a prime 6 acre plot in Karen and intends to develop it into a 24,000 square metres lifestyle mall with commercial office space

The company posted a Kshs. 54 Million Profit After Tax for its half year ended 30^th June 2011. The group’s peak year in terms of profitability for the last 5 years was a net profit of Kshs. 1.17 Billion in 2007.

In 2010, the company had a PAT of Kshs. 468 Million. The company will however have to produce a stellar 2^nd half performance to match those results.

Management though had indicated its intentions to ramp up production further in the 2^nd half as key capacity expansion projects in Kenya, Tanzania and South Africa came to fruition

Total Assets for TransCentury as at half year 2011 stood at Kshs. 15.3 Billion

TCL had listed 267,038,090 shares but under its Convertible Bond Programme (CBP), it listed an additional 6,912,194 shares taking the total number of listed shares to 273,950,284.

144,008,422 ordinary shares still remain reserved for the CBP

Whether the share will hold at current prices or go much lower will depend on the set of its 2011 second half performance.

TransCentury C.E.O Gachao Kiuna was featured alongside his Centum counterpart James Mworia on Forbes’ 10 youngest power men in Africa

DIAMOND TRUST BANK 9 MONTH PROFIT BEFORE TAX UP 13% TO 3.1 BILLION

2011-11-03T13:19:00.000+03:00

Today morning Diamond Trust Bank Kenya Group (DTBK) announced its financial results for the 9 month period ended September 30^th 2011

Profit Before Tax rose by 13.1% to hit Kshs. 2.1 Billion. Profit After Tax was up 10.4% to Kshs. 1.95 Billion

Subsidiaries in Uganda, Tanzania and Burundi contributed Kshs. 264 Million to the Profit After Tax, 13.6% of the total profit. At half year, the contribution was 12%

Cost:Income ratio was down to 53.6% from 52.82%

2010 vs. 2011 Analysis

	2010 Kshs.	2011 Kshs.	% CHANGE
TOTAL ASSETS	80.2 BILLION	107.2 BILLION	+33.6%
NET LOANS AND ADVANCES	50.1 BILLION	74.6 BILLION	+49.1%
CUSTOMER DEPOSITS	62.5 BILLION	85.9 BILLION	+37.3%
LOAN:DEPOSIT RATIO	80.07%	86.95%	+6.9%
TOTAL INTEREST INCOME	5.44 BILLION	6.7 BILLION	+23.1%
TOTAL INTEREST EXPENSE	2 BILLION	2.02 BILLION	+1.4%
NET INTEREST INCOME	3.45 BILLION	4.68 BILLION	+35.6%
TOTAL OPERATING INCOME	5.83 BILLION	6.7 BILLION	+14.9%
TOTAL OPERATING EXPENSE	3.1 BILLION	3.6 BILLION	+16.5%
COST:INCOME RATIO	52.82%	53.57%	+0.7%
PROFIT BEFORE TAX	2.75 BILLION	3.11 BILLION	+13.1%
PROFIT AFTER TAX	1.77 BILLION	1.95 BILLION	+10.4%

Total Assets increased by Kshs. 37 Billion to Kshs. 107.2 Billion

Customer Deposits was up 37.3% to Kshs. 85.9 Billion

The increased deposit base allowed DTBK to advance more loans to customers. Indeed, Net

Loans and Advances surged 49.1% to Kshs. 74.65 Billion

Total Interest Income was up 23.1% to Kshs. 6.7 Billion, helped by a 28.3% rise in interest from Loans and Advances to Kshs. 5.95 Billion. Interest from Government Securities slipped 20.4% to Kshs. 561 Million

Loan Loss Provision decreased by 25% to Kshs. 366 Million

Non Interest Income went down 15% to Kshs. 2 Billion as ‘Other Income’ fell by 81% to Kshs. 200 Million.

Fees and Commissions were up 41.8% to Kshs. 1.11 Billion

Foreign Exchange Trading Income registered a 30.8% growth amid the recent volatility of the Kenya Shilling to Kshs. 707 Million

Staff Costs increased by Kshs. 243 Million to Kshs. 1.43 Billion

Gross Non Performing Loans increased to Kshs. 915 Million from Kshs. 820 Million as a result of the increase in Net Loans.

The quality of the loan book (GNPL/Net Loans) still improved to 1.23% from 1.64%.

Net Non Performing Loans was up by 19.3% to Kshs. 108 Million

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011 Kshs.	Q3 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	2.2 BILLION	2.6 BILLION	+16.5%
TOTAL INTEREST EXPENSE	619.3 MILLION	838.6 MILLION	+35.4%
NET INTEREST INCOME	1.58 BILLION	1.73 BILLION	+9.1%
TOTAL OPERATING INCOME	2.2 BILLION	2.47 BILLION	+12.4%
TOTAL OPERATING EXPENSE	1.02 BILLION	1.41 BILLION	+38.7%
COST:INCOME RATIO	46.4%	57.3%	+10.9%
PROFIT BEFORE TAX	1.18 BILLION	1.05 BILLION	-10.4%
PROFIT AFTER TAX	818 MILLION	612 MILLION	-25.2%

A glance at the Quarter on Quarter analysis reveals Q3 was definitely tougher than Q2 for DTBK

Operating Expenses rose by 38.7% in the Quarter

Cost:Income ratio for the 3^rd Quarter alone stood at 57.31%, 10.9% higher than Q2 2011 which had a Cost:Income ratio of 46.44%

It thus follows that Profits for the 3^rd Quarter were lower than Q2 Profits

Following the results, DTBK is trading at Price Earnings ratio of 7.37

BARCLAYS BANK OF KENYA 9 MONTH AFTER TAX PROFIT UP 11.2% TO 6.1 BILLION

2011-11-02T23:41:00.004+03:00

Barclays Bank of Kenya (BBK) announced its financial results for the 9 months ended September 30^th 2011

Profit Before Tax rose by 26.4% to stand at Kshs. 8.9 Billion. Profit After Tax, though, was up 11.2%, at Kshs. 6.1 Billion

The profit growth was guided by a significant reduction in staff costs and a reduction in the loan loss provision

Gross Non-Performing Loans (GNPL) were down 9.8 percent resulting in GNPL/Net Loans improving by 1.1% to 5.76%

The significant reduction in expenses led in the Cost:Income ratio reducing to 54.65%, from 64.46%

During the period, BBK managed to recover previously impaired loans

2010 vs. 2011 Analysis

	2010 Kshs.	2011 Kshs.	% CHANGE
TOTAL ASSETS	177.1 BILLION	180.9 BILLION	+2.1%
NET LOANS AND ADVANCES	91.7 BILLION	98.9 BILLION	+7.9%
CUSTOMER DEPOSITS	127.7 BILLION	135.8 BILLION	+6.3%
LOAN:DEPOSIT RATIO	71.78%	72.82%	+1.0%
TOTAL INTEREST INCOME	13.3 BILLION	12.7 BILLION	-4.3%
TOTAL INTEREST EXPENSE	1.22 BILLION	732 MILLION	-40%
NET INTEREST INCOME	12.1 BILLION	12 BILLION	-0.7%
TOTAL OPERATING INCOME	19.7 BILLION	19.6 BILLION	-0.9%
TOTAL OPERATING EXPENSE	12.7 BILLION	10.7 BILLION	-16%
COST:INCOME RATIO	64.46%	54.65%	-9.8%
PROFIT BEFORE TAX	7 BILLION	8.9 BILLION	+26.4%
PROFIT AFTER TAX	5.5 BILLION	6.1 BILLION	+11.2%

Total Assets grew by 2.1% to Kshs. 180.9 Billion, which is less than the 5.3% which the entire industry grew by in the 9 months to September

Net Loans were up 7.9% to Kshs. 98.9 Billion

The Bank managed to ramp up its profits in the period in no small part to the reduction in their expenses, as Total Interest Income and Total Operating Income were both down

Interest from Loans and Advances as well as Interest from Government Securities was down.

Meanwhile Interest Expenses on Customers Deposits was more than halved to Kshs. 433 Million, from 914 Million

Loan loss provision reduced by 55.7% to Kshs. 520 Million from Kshs. 1.2 Billion

Fees and Commissions declined by 7.2% to Kshs. 5.2 Billion

Foreign Exchange Trading Income was up 16.1% to Kshs. 2.1 Billion

Barclays’ decision to lay off managers at the beginning of the year led to Staff Costs decreasing by 15.1% or almost Kshs. 1 Billion

Liquidity was at a solid 47.6%, a 27.6% excess on the Minimum Statutory Ratio

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011 Kshs.	Q3 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	4.0 BILLION	4.9 BILLION	+24%
TOTAL INTEREST EXPENSE	232.5 MILLION	319 MILLION	+37%
NET INTEREST INCOME	3.71 BILLION	4.57 BILLION	+23.2%
TOTAL OPERATING INCOME	6.3 BILLION	7.1 BILLION	+12.4%
TOTAL OPERATING EXPENSE	3.34 BILLION	3.55 BILLION	+6.0%
COST:INCOME RATIO	53.2%	50.2%	-3.0%
PROFIT BEFORE TAX	2.94 BILLION	3.52 BILLION	+19.7%
PROFIT AFTER TAX	2.11 BILLION	2.47 BILLION	+16.9%

BBK saw a positive Q3 2011 in comparison to Q2 2011

It is however interesting to note the 37% rise in Total Interest Expense for the corresponding quarters which is will likely be replicated in the next couple of quarters

The release of the results came hot on the heels of the decision by the Central Bank of Kenya Monetary Policy Committee to raise the Central Bank Rate by 550 basis points to 16.5% in its attempt to try to rein in inflation

This will make the rest of the year a tough period for Kenyan banks to find new lending opportunities. Economic growth is expected to cool

Barclays closed Wednesday trading down 4.62% to 14.45/=. The share though rallied 38.5% in the month of October, only being bested by Williamson Tea which rose 62% in the same month. Barclays is trading at a Price to Earnings ratio of 7.5.

KENYA COMMERCIAL BANK POSTS 40% JUMP IN 9 MONTH PROFIT BEFORE TAX

2011-10-25T17:54:00.000+03:00

Today afternoon saw the Kenya Commercial Bank Group (KCB) announce its financial results for the 9 month period ending September 30^th 2011

The announcement came hot on the heels of Equity Bank’s own release yesterday and they managed to pip Equity by registering a higher Profit Before Tax.

KCB announced a Profit Before Tax of Kshs. 9.1 Billion, a 39.9% jump. Profit After Tax came in at Kshs. 6.4 Billion, a rise of 43.1%

Speaking during the release of the bank’s half year trading results, KCB Group Chairman Peter W. Muthoka noted the difficult operating environment in which banks were operating in. “Over the past six months, we have witnessed the economy going through turbulent times owing to a series of price shocks on fuel and food that has seen the 12-month overall inflation hit 17.32% by September, 2011. Despite all this, the bank has been able to register impressive results, driven by our Transformation Initiatives and growth in our respective business segments,” said the Chairman.

Efficiency, measured by the Cost:Income ratio improved to 66.1% from 70.3%

Subsidiaries continued their positive contribution to the Group business. They made Kshs. 400 Million more in Profit Before Tax than they made at this time last year, validating the managements decision to use some of the Rights Issue money on giving them much needed boosts

They have recently focused their energies on the property sector

The bank reduced its investment in Securities by 23.7% or Kshs. 12.1 Billion in order to focus on lending activities

KCB’s customer base now stands at 1.8 Million for both retail and corporate segments

Q3 2010 vs. Q3 2011 Analysis

	2010 Kshs.	2011 Kshs.	% CHANGE
TOTAL ASSETS	244.2 BILLION	322.5 BILLION	+32%
NET LOANS AND ADVANCES	137.9 BILLION	193.9 BILLION	+40.6%
CUSTOMER DEPOSITS	193.1 BILLION	252.4 BILLION	+30.7%
LOAN:DEPOSIT RATIO	71.4%	76.82%	+5.4%
TOTAL INTEREST INCOME	17.5 BILLION	19 BILLION	+8.8%
TOTAL INTEREST EXPENSE	2.9 BILLION	2.4 BILLION	-15.7%
NET INTEREST INCOME	14.6 BILLION	16.6 BILLION	+13.6%
TOTAL OPERATING INCOME	21.9 BILLION	26.9 BILLION	+22.8%
TOTAL OPERATING EXPENSE	15.4 BILLION	17.8 BILLION	+15.6%
COST:INCOME RATIO	70.26%	66.12%	-4.1%
PROFIT BEFORE TAX	6.5 BILLION	9.1 BILLION	+39.9%
PROFIT AFTER TAX	4.5 BILLION	6.4 BILLION	+43.1%

KCB ramped up its lending by 40.6% to Kshs. 194 Billion which resulted in its Loan:Deposit ratio rising by 5.4% to 76.8%

KCB’s Non-Interest Income was buoyed by a 47.9% increase in its Fees and Commissions to Kshs. 6.9 Billion. Fees and Commissions now account for 67.3% of its Total Non-Interest Income

Despite the huge volatility in the Currency Markets, Foreign Exchange trading income was flat at Kshs. 2.2 Billion

A 19.4% rise in staff costs to Kshs. 8.65 Billion did not hamper efficiency, measured by the Cost:Income ratio, which improved to 66.1% from 70.3%

Gross Non-Performing Loans (GNPL) increased by 3.3% but overall, the quality of the loan book (GNPL/Net Loans) improved by 3% to 8.19%

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011 Kshs.	Q3 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	6.1 BILLION	7.2 BILLION	+19.1%
TOTAL INTEREST EXPENSE	649.8 MILLION	1.2 BILLION	+78.7%
NET INTEREST INCOME	5.4 BILLION	6.1 BILLION	+12.0%
TOTAL OPERATING INCOME	9 BILLION	10 BILLION	+11.7%
TOTAL OPERATING EXPENSE	5.7 BILLION	6.6 BILLION	+15.9%
COST:INCOME RATIO	63.93%	66.3%	+2.4%
PROFIT BEFORE TAX	3.2 BILLION	3.4 BILLION	+4.3%
PROFIT AFTER TAX	2.3 BILLION	2.4 BILLION	+3.1%

Q3 saw a huge increase in Interest Expenses to Kshs. 1.2 Billion, a 79% increment from Q2

Operating Expenses in the 3^rd Quarter also grew faster than Operating Income resulting in Cost:Income ratio in Q3 settling at 66.33%, 2.4% more than in Q2

The Group still managed to post steady growth with Profit Before Tax and Profit After Tax growing at 4.3% and 3.1% respectively from the previous quarter

Since the last 3 months, the tables have been turned and it is now Equity who trail KCB in Profit Before Tax by a figure of around Kshs. 100 Million. At Half Year, KCB trailed Equity by a similar figure

At 14.95, KCB is now trading at a Forward Price to Earnings ratio of 5.14.

EQUITY BANK 9 MONTH PROFIT AFTER TAX RISES 42% TO 7.3 BILLION

2011-10-24T12:34:00.002+03:00

Equity Bank Group today morning released its financial results for the 9 months period ending September 30^th 2011.

Profit After Tax was up 42.3% to stand at Kshs. 7.3 Billion. The Bank registered a Profit Before Tax of Kshs. 9 Billion, a growth of 39.1%

For its Half Year Results for 2011, Equity Bank had seen Profit Before Tax and Profit After Tax shoot up 51.8% and 57.4% respectively

The last 3 months have been a difficult operating environment for banks which has been characterized by rising inflation and rate hikes by the Central Bank of Kenya. Many banks also hiked their base lending rate. (See previous article on http://kenyainvesting.blogspot.com/2011/06/likely-impact-of-high-inflation-on.html)

But the period was also characterized by huge volatility of the Kenya Shilling and Equity has seen huge growth in Foreign Exchange Trading Income, with that income segment more than doubling.

Subsidiaries contributed Kshs. 595 Million or 8.15% of Profit After Tax in comparison to the 366 Million loss they had last year

2010 vs. 2011 Analysis

	2010 Kshs.	2011 Kshs.	% CHANGE
TOTAL ASSETS	136.6 BILLION	195.4 BILLION	+43%
NET LOANS AND ADVANCES	70.9 BILLION	109.4 BILLION	+54.2%
CUSTOMER DEPOSITS	97 BILLION	144.5 BILLION	+48.9%
LOAN:DEPOSIT RATIO	73.1%	75.7%	+2.6%
TOTAL INTEREST INCOME	9.9 BILLION	13..56 BILLION	+37.1%
TOTAL INTEREST EXPENSE	1.5 BILLION	2.44 BILLION	+63.3%
NET INTEREST INCOME	8.4 BILLION	11.12 BILLION	+32.5%
TOTAL OPERATING INCOME	16.5 BILLION	20.46 BILLION	+23.9%
TOTAL OPERATING EXPENSE	10 BILLION	11.47 BILLION	+14.2%
COST:INCOME RATIO	60.9%	56.1%	-4.8%
PROFIT BEFORE TAX	6.46 BILLION	9 BILLION	+39.1%
PROFIT AFTER TAX	5.13 BILLION	7.3 BILLION	+42.3%

Gross Non Performing Loans was slightly down 2% to Kshs. 3.5 Billion

Net Non Performing loans however was down 27.3% to Kshs. 1.44 Billion from Kshs. 2 Billion

The Cost: Income ratio was down 4.8% to 56.1%

Foreign Exchange Trading Income trading income surged by 155.8% to Kshs. 1.53 Billion from Kshs. 597 Million

Staff Costs were up 9.2% to Kshs. 4.1 Billion

Total Fees and Commissions registered an increase of 12% Kshs. 5.7 Billion

It will come as no surprise that during the period under review, Interest Expenses rose at a much faster pace than Interest Income

The bank significantly reduced Securities ‘held for dealing purposes’.

Interest from Government Securities increased by 35.24% to Kshs. 1.97 Billion, this constituting 14.5% of Total Interest Income

Interest from Loans and Advances was up 33.5% to Kshs. 11.2 Billion this representing 82.6% of Total Interest Income

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011 Kshs.	Q3 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	4.3 BILLION	5.24 BILLION	+21.9%
TOTAL INTEREST EXPENSE	620 MILLION	1.4 BILLION	+124.8%
NET INTEREST INCOME	3.68 BILLION	3.85 BILLION	+4.6%
TOTAL OPERATING INCOME	6.63 BILLION	7.3 BILLION	+10.1%
TOTAL OPERATING EXPENSE	3.67 BILLION	4.15 BILLION	+13.3%
COST:INCOME RATIO	55.27%	56.83%	+1.6%
PROFIT BEFORE TAX	2.97 BILLION	3.15 BILLION	+6.3%
PROFIT AFTER TAX	2.40 BILLION	2.56 BILLION	+6.1%

Interest Expenses more than doubled in the 3^rd Quarter in comparison to the 2^nd Quarter.

Cost:Income ratio was also slightly up 1.6% to 56.83%

Generally, expenses grew at a faster rate than income Q3 vs. Q2 period

The bank still proved resilient in the harsh environment and managed to grow profits in the 3^rd Quarter by 6% more than in the 2^nd Quarter

Earnings Per Share rose to 2.63/=. At the current price of 18.85/=, this represents a Price to Earnings ratio of 7.17.

UCHUMI SUPERMARKETS FULL YEAR PRE-TAX PROFITS UP 18.9%

2011-09-09T13:04:00.001+03:00

Uchumi Supermarkets (Uchumi) saw its net sales improve by 12.8% to Kshs. 10.84 Billion in the period under review.

Gross profits were up 10% to Kshs. 2.35 Billion from Kshs. 2.1 Billion

Profit Before Tax was up 18.85% to Kshs. 514.8 Million though Profit After Tax reduced to Kshs. 390.4 Million from Kshs. 865.1 Million. This was as a result of the end of tax-credits Uchumi enjoyed from the Kenya Government while it was in the recovery phase

Operating expenses increased to Kshs. 1.8 Billion from Kshs. 1.6 Billion, a rise of 14.6%. The rise in expenses led to Operating Profits slumping 3.4% to Kshs. 518.4 Million

Management noted that costs increased “in line with the growth in business as well as the runaway increase in inflation caused by the increasing cost of global fuel prices which in itself is a significant factor on the prices of commodities”

Finance costs decreased significantly from Kshs. 103.6 Million to only Kshs. 3.6 Million

Reserves now sit at Kshs. 952 Million up 49%. At 30^th June 2009, reserves were at negative Kshs. 1.1 Billion, this showing how far the company has come in the past 2 years

Term loans decreased to Kshs. 183 Million from Kshs. 320 Million.

Customer numbers now stand at 19 Million from 18 Million last year

Total Assets were up to Kshs. 4 Billion from Kshs. 3.15 Billion, a 27% rise.

Investors seemed impressed by the performance of the retailer as the share was up 6.3% to Kshs. 8.40/= in early afternoon trading. This represents a Price to Earnings Ratio of 5.7

After the successful turnaround, Uchumi is now focused on expansion, from which it aims to double its market value in 2 years. In the run-up to the relisting of the shares Jonathan Ciano, its Chief Executive Officer, had this to say:

"The value of the company is expected to grow by 50-100 percent within the next two years. That is the value of this organisation, and within five years it is definitely going to more than double."

"We are going into what you would call very cautious growth. A growth that would call for us to go into areas where we are not covered as yet," Ciano said. "We are talking of going into green areas without cannibalising our existing network so that is how we have mitigated the risks."

Ciano stated that the supermarket chain plans to open at least 5 branches by the end of the year with a possibility of opening an additional three.

It recently opened a store at ‘Quality Mall’ in Dar-es-Salaam and has 3 stores in Uganda

REVIEW OF THE TOP 5 LISTED BANKS HALF YEAR 2011 PERFORMANCE

2011-09-01T11:49:00.000+03:00

With all top 5 banks now having released their 2011 half year results, I did a review of their performance across different banking and business indicators.

I also analysed their performance against the entire banking industry’s Half Year performance

The total banking sector deposit accounts was 12.8 Million from 10.1 Million

Co-op registered a growth of 57% and now has 2.2 Million accounts

Equity with 6.3 Million accounts, a 28% growth, accounts for 49% of all accounts

Profitability

From the 1^st Quarter 2011, The Co-operative Bank of Kenya (Co-op) managed to move above Standard Chartered Bank of Kenya (SCBK) into position 4 in Profit Before Tax. Co-op’s Kshs. 4.1 Billion, a 42% rise from the 2010 half year, was significantly more than SCBK’s Kshs. 3.5 Billion, a slump of 14%

The Top 3 positions remained unchanged from the 1^st Quarter results. Equity Bank, Kenya Commercial Bank (KCB) and Barclays Bank of Kenya (BBK) occupied the Top 3 positions with Profit Before Tax figures of Kshs. 5.84 Billion, Kshs. 5.74 Billion and Kshs. 5.35 Billion respectively.

Pre-tax profitability for the total banking industry for the half year period to 30^th June rose 16.9% to Kshs. 40.8 Billion

The Top 5 Listed Banks (Henceforth referred to as ‘The Top 5’) though grew at a much faster pace than the industry as a whole. Profitability grew 24.2% from Kshs. 19.8 Billion to Kshs. 24.5 Billion.

This figure represents 60% of all banking sector profits, up from 56.6% in the 2010 half year. Such is the dominance of The Top 5

Customer Deposits

Total banking deposit base increased by 16.7% to Kshs. 1.4 Trillion from Kshs. 1.2 Trillion

KCB remains well ahead of other banks in Customer deposits. Its deposits of Kshs. 215 Billion, which grew 12.4% in comparison to HY 2010, are nearly double SCBK’s deposits of Kshs. 109 Billion.

Equity Bank though grew its deposits the by 59.4%, the highest among The Top 5. Its deposits now stand at Kshs. 124 Billion

BBK, recorded a 1.6% decline in deposits to Kshs. 128.4 Billion

Cumulatively, The Top 5 had deposits of Kshs. 708 Billion or 50.65% of total banking sector deposits. This was slightly down from 51.4% in HY 2010

Net Loans and Advances

SCBK grew their net loans and advances by 66.6% to Kshs. 83.7 Billion. They however still possess the smallest loan book among The Top 5. KCB again comes out on top with a loan book of Kshs. 175 Billion, which grew 34.8%. This is nearly Kshs. 78 Billion more than its nearest competitor Equity Bank, for whom a 43.2% gain saw its advances grow to Kshs. 97.7 Billion

BBK’s loan book was flat at Kshs. 92 Billion, no doubt a major cause of concern for investors, as its peers saw their advances grow by double digits

The total loan book of The Top 5 grew 32.5% or Kshs. 133.5 Billion to Kshs. 543.5 Billion

The quality of the loan book for The Top 5, measured as a proportion of net non performing loans to net loans and advances, improved to 2% from 3.15%

Balance Sheet

Top 5 total assets grew by 20.35% to Kshs. 945.7 Billion, lower than the entire banking sector which grew 26.7% to Kshs. 1.9 Trillion.

KCB, with an asset base of nearly Kshs. 280 Billion, comes out top

BBK grew its total assets by 2.2% to Kshs. 176.5 Billion

SCBK, Co-op, and Equity saw their total assets increase by 16.8%, 23.4%, and 39.9% to Kshs. 153 Billion, Kshs. 165 Billion and Kshs. 171 Billion respectively

The Top 5 hold just under 50% of all banking sector assets

Subsidiaries

Co-op bank’s subsidiaries contributed more than double what they did in HY 2010, when they made Kshs. 62.8 Million. In H1 2011, they contributed Kshs. 153 Million in Profit Before Tax.

Kingdom Securities Limited made a Profit Before Tax of Kshs. 25.2 Million, a growth of 65.8%

Co-op Trust Investment Services Limited, which has a portfolio of Kshs. 25.8 Billion, made a Profit Before Tax of Kshs. 34.4 Million

Co-op Consultancy Limited meanwhile, had a Profit Before Tax of Kshs. 3.2 Million

KCB and Equity Banks’ subsidiaries moved from loss-making into the profit zone. KCB’s subsidiaries contributed Kshs. 320 Million in Profit Before Tax while Equity’s, which plans to invest Kshs. 1 Billion in Rwanda and Kshs. 1.5 Billion in Tanzania, made Kshs. 623 Million

Interest Expenses

The half saw significant decrease in the cost of funds as aggregate interest expenses for The Top 5 went down by 30.6%

SCBK and BBK both managed to cut their Total Interest Expense by over 50%.

Co-op had the highest interest expenses at Kshs. 1.3 Billion, a reduction of 10% over the previous period.

KCB managed to reduce its Interest Expenses by 42.3% to Kshs. 1.25 Billion

Equity saw a 3.7% rise in its Interest Expenses to 1.04 Billion.

Government Securities

2011 so far has been plagued by a rise in the rate of inflation and the weakening of the Kenya Shilling against major world currencies.

High rates had the effect of devaluing bond portfolios held by banks and some, like SCBK revalued their bond portfolios, which hit their performance hard. SCBK reduced its investment in Government Securities (Kenya Government Securities plus Other Securities held for dealing purposes) by 40.4% to Kshs. 31.5 Billion from Kshs. 52.8 Billion, and focused its attention to customers by ramping up its lending by 66.6%

Last year banks made huge gains in bond trading, but this year it promises to be an entirely different affair

Co-op, KCB and Equity saw a drop in ‘Other Income’ under Other Operating Income

BBK moved from a loss of Kshs. 48 Million in ‘Other Income’ to a gain of Kshs. 325 Million

Operational Efficiency

SCBK had the lowest Cost to Income ratio at 51.37%. This however declined from 42.53% in HY 2010

The other Top 5 all had declines of in their Cost to Income ratio.

KCB’s was highest with 66%, down from 69.6% last year

Inflation & The Kenya Shilling

In the year to date, the shilling has lost 16.7% against the dollar. Its undoing has mainly been strong dollar demand and what some see as inaction by the Central Bank of Kenya (CBK) in effecting monetary policy. CBK also blamed ‘speculation’ by local banks in the FOREX market

Inflation in August rose for the 10^th consecutive month to 16.67% in August. In January 2011, the figure was 5.4%

Interbank lending rates rose quickly to above 20% after the CBK tightened the overnight borrowing rules to support the shilling, increasing the cost of borrowing for the Government.

Recently, Fitch Credit Rating warned that Kenya’s credit rating could be downgraded from the current B+ rating, thereby raising the country’s cost of borrowing

Bankers have warned of a looming rise in lending rates due to the rise of the cost of funds. Fears of loan defaults are also on the up

Indeed, on 1^st September 2011, BBK announced that it had raised its minimum lending rate on shilling-denominated loans to 14.75% from 13.75% citing “rising cost of mobilizing deposits” The bank also aims to cushion itself against high inflation

This move follows other banks which started doing the same from July. Among the first to do so was Commercial Bank of Africa which raised the interest it charges on loans to 14% from 13% barely 3 months after it had cut the same

The most recent move by CBK to tackle the problem is to allow banks to maintain the prevailing Cash Reserve Ratio of 4.75% on a monthly basis, though this must not fall below 3% at any one time, provided the overall average for the month is at least 4.75%. This will have the effect of injecting some more cash into the economy

Agency Banking

CBK has approved 6 banks to undertake agency banking with a total of 6,513 agents being approved as at 30^th June 2011

Co-op has 440 agents, with a view of 2000 by year end

KCB has 1400 agents while Equity Bank has 2300 agents approved.

Agency banking is expected to significantly cut costs of the brick and mortar expansion of banks have been on in the past couple of years, and more importantly reach the ‘unbanked’ of the population who have been excluded from financial services

Valuations

	Return on Equity	Market Capitalisation Kshs.	Forward Price:Earnings Ratio
Standard Chartered Bank of Kenya	27.8%	58.3 BILLION	11.65
Co-operative Bank of Kenya	33.1%	49.9 BILLION	7.53
Barclays Bank of Kenya	27.2%	70.3 BILLION	9.66
Kenya Commercial Bank	21.1%	58.7 BILLION	7.24
Equity Bank	32.6%	71.8 BILLION	7.58

Note: Market Capitalisation and Forward P.E’s were calculated using prices as at Tuesday 30^th August 2011. The Return on Equity is as per the Half Year 2011 results

Outlook for the Second Half

The high lending and inflation rates seriously threaten to spoil the party for banks.

They will however weather the storm and post robust full year growth, though likely lower than the first half

Agency Banking and regional subsidiaries will be key to future profitability, not just for the 2^nd Half, which will see focus turned on local banks that have or already have a regional agenda

Tabular Summaries of The Top 5’s Half Year

	EQUITY BANK GROUP	KENYA COMMERCIAL BANK GROUP	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA	STANDARD CHARTERED BANK OF KENYA
TOTAL ASSETS	171.35 BILLION	279.7 BILLION	176.5 BILLION	164.8 BILLION	153.3 BILLION
NET LOANS AND ADVANCES	97.71 BILLION	175.2 BILLION	91.8 BILLION	95 BILLION	83.7 BILLION
CUSTOMER DEPOSITS	130 BILLION	215.7 BILLION	128.4 BILLION	130.7 BILLION	109 BILLION
LOAN:DEPOSIT RATIO	75.2%	81.2%	71.5%	72.8%	76.61%
TOTAL INTEREST INCOME	8.31 BILLION	11.8 BILLION	7.8 BILLION	7.3 BILLION	5.08 BILLION
TOTAL INTEREST EXPENSE	1.04 BILLION	1.2 BILLION	414 MILLION	1.33 BILLION	523 MILLION
NET INTEREST INCOME	7.27 BILLION	10.5 BILLION	7.4 BILLION	5.96 BILLION	4.5 BILLION
TOTAL OPERATING INCOME	13.15 BILLION	16.9 BILLION	12.5 BILLION	9.3 BILLION	7.13 BILLION
TOTAL OPERATING EXPENSE	7.36 BILLION	11.1 BILLION	7.1 BILLION	5.3 BILLION	3.66 BILLION
COST:INCOME RATIO	55.6%	66%	57.2%	56.5%	51.37%
NET NON PERFORMING LOANS	1.98 BILLION	6.15 BILLION	807 MILLION	1.45 BILLION	313 MILLION
PROFIT BEFORE TAX	5.84 BILLION	5.7 BILLION	5.35 BILLION	4.15 BILLION	3.5 BILLION
PROFIT AFTER TAX	4.74 BILLION	4.1 BILLION	3.6 BILLION	3.31 BILLION	2.5 BILLION

	EQUITY BANK GROUP	KENYA COMMERCIAL BANK GROUP	BARCLAYS BANK OF KENYA	THE CO-OPERATIVE BANK OF KENYA	STANDARD CHARTERED BANK OF KENYA
TOTAL ASSETS	+39.9%	+31.3%	+2.2%	+23.4%	+16.8%
NET LOANS AND ADVANCES	+43.2%	+34.8%	+0.3%	+35.8%	+66.6%
CUSTOMER DEPOSITS	+59.4%	+12.4%	-1.6%	+19.2%	+10.5%
LOAN:DEPOSIT RATIO	-2.5%	+19.9%	+1.4%	+8.9%	+25.8%
TOTAL INTEREST INCOME	+29.4%	+7.9%	-15.5%	+31.5%	+0.6%
TOTAL INTEREST EXPENSE	+3.7%	-42.3%	-52.4%	-9.7%	-50.4%
NET INTEREST INCOME	+34.2%	+20.3%	-11.6%	+46.4%	+12.4%
TOTAL OPERATING INCOME	+30%	+21.9%	-5.5%	+33.1%	+1.2%
TOTAL OPERATING EXPENSE	+16.5%	+15.5%	-15.6%	+28.7%	+22.2%
COST:INCOME RATIO	-6.4%	-5.2%	-6.8%	-2%	+8.8%
NET NON PERFORMING LOANS	-23.3%	+0.2%	-56.1%	-14.4%	-50%
PROFIT BEFORE TAX	+51.8%	+36.4%	+12.6%	+42.4%	-14.4%
PROFIT AFTER TAX	+57.4%	+41.6%	-2%	+41.3%	-11.9%

CFC INURANCE HOLDINGS AFTER TAX PROFIT SURGES 73.2%

2011-08-30T14:42:00.001+03:00

CFC Insurance Holdings Limited (CFCIH) have released their results for the Half Year period ending 30^th June 2011

Profits surged with Profit Before Tax up 75% to 441.8 Million

Net Premium Revenue rose an impressive 53.9% to 2.1 Billion

Profit After Tax grew from 193.2 Million to 334.5 Million, an increase of 73.2%

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
NET PREMIM REVENUE	1.4 BILLION	2.1 BILLION	+53.9%
TOTAL INCOME	2.2 BILLION	3.3 BILLION	+54.3%
NET BENEFITS AND CLAIMS	1.04 BILLION	1.4 BILLION	+37.8%
OPERATING PROFIT	228.8 MILLION	413.7 MILLION	+80.8%
PROFIT BEFORE TAX	252.5 MILLION	441.8 MILLION	+75%
PROFIT AFTER TAX	193.2 MILLION	334.5 MILLION	+73.2%
EARNINGS PER SHARE	0.42/=	0.65/=	+54.8%

Commissions nearly tripled from 82 Million to 231.8 Million

CFCIH saw its Investment Income surge by 94.6% to 939.4 Million

Total Expenses and commissions registered a rise of 66.8% from 886.4 Million to 1.48 Billion

Other operating expenses increased by an equally high 55.8% to 1.04 Billion

Management said that the improved performance was a result of operational strategies delivering on the synergy objectives which included last year’s acquisition of Heritage Group and the listing of CFCIH ‘s shares at the NSE this April

The group however realised a significant reduction in Total Comprehensive Income from 1.2 Billion, to a loss of 959 Million. This was blamed on a decline in the fair values of equities listed at the NSE and rising interest rates that negatively affected the valuation of the group’s investments in Government bonds

The Groups operations are still undergoing significant change and will be banking on the improvement of distribution channels as well as introduction of new alternative distribution channels to ensure shareholder value

This is an impressive performance from CFCIH, though the continuing dwindling fortunes of the NSE might knock a bit off their performance at Full Year

The company now trades at a lower Forward P.E of 8.1

TRANSCENTURY LIMITED HALF YEAR 2011 RESULTS

2011-08-30T12:54:00.000+03:00

TransCentury Limited (TCL), a holding company with a focus on infrastructure investment yesterday released their Half Year results for the period ending June 30^th 2011.

The company moved from a pre-tax loss of Kshs. 48.6 Million, to a profit of Kshs. 165.4 Million

Profit After Tax improved to Kshs. 53.9 Million from a loss of Kshs. 167.9 Million

The company was buoyed by a rise in regional sales volumes in the Power Infrastructure decision which pushed revenues up 40% to Kshs. 4.5 Billion.

Operating margins however reduced to 8.9% from 12%

During the period in review, the Tanzanian operation returned to profitability

Net finance costs reduced marginally by Kshs. 4.2 Million to Kshs. 238.5 Million

Total Assets increased by 36% to Kshs. 15.3 Billion

Earlier this month, Rift Valley Railways (RVR), which TCL holds a 34% stake, concluded a $164 Million debt financing package aimed at upgrading rail services

RVR expects to launch its extensive capital investment of $287 Million program imminently now that loan agreements have been signed.

TCL had previously issued a press release indicating that the Company had plans to list an extra 6,912,194 ordinary shares in connection with the company’s Convertible Bond Programme. This will bring the Total Issued Shares to 273,950,284. 144,008,422 shares still remain unissued

Incorporating the extra shares to be listed, projected Earnings Per Share for the full year will be 0.39/= At the current price of 38/=, TCL trades a PE of 96.6

That definitely is too high for anyone’s liking. How the arrangers of the listing came up with a price of 50/= is beyond comprehension

The company closed with a positive cash position of Kshs. 2.5 Billion, from a negative cash of Kshs. 27.4 Million in the corresponding half year in 2010

Debt/Equity ratio reduced to 0.93 from 1.5

Management expects demand to remain strong for the rest of the year and expects production to further increase as key capacity expansion has been completed

CROWN BERGER HALF YEAR 2011 NET PROFIT UP 7.8% TO KSHS. 45.9 MILLION

2011-08-25T18:50:00.001+03:00

CROWN BERGER today morning released their Half Year results for the half year period ending 30^th June 2011

Turnover rose 26.63% to Kshs. 1.81 Billion from Kshs. 1.43 Billion

Net Profit Margin was however down to 2.5% from 3% due to weakening of the Kenya Shilling and high raw material prices

Earnings Per Share went up from Kshs. 1.79/= to Kshs. 1.93/=

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TURNOVER	1.43 BILLION	1.81 BILLION	+26.63%
NET FINANCE COSTS	22.4 MILLION	14.1 MILLION	-37.15%
PROFIT BEFORE TAX	70.1 MILLION	75.1 MILLION	+7.14%
NET PROFIT	42.5 MILLION	45.9 MILLION	+7.81%
NET PROFIT MARGIN	3%	2.5%	-0.5%
EARNINGS PER SHARE	1.79/=	1.93/=	+7.82%

Total Assets rose 32.81% to Kshs.2.48 Billion

Management noted that “the outlook for the 2^nd Half of the year is a matter of concern due to the current economic situation in the country and the board has taken measures to sustain profitability with a positive note”

No interim dividend was declared

Crown Berger finished the day at NSE trading as the highest gainer. It traded 2,800 shares at Kshs. 29.00 ending up higher by 16%

At that price, it is trading at a forward Price/Earnings ratio of 7.5

TOTAL KENYA HALF YEAR 2011 ANALYSIS

2011-08-25T12:03:00.000+03:00

TOTAL KENYA (TOTAL) have released their results for the half year period ending 30^th June 2011

Net Profit was down 73.6% to Kshs. 79.7 Million from Kshs. 302.3 Million

Gross Profit declined 23% to Kshs. 2.63 Billion

The results pale in comparison to KenolKobil’s 1^st Half 2011 results which saw Profit After Tax rise by 82.9% to Kshs. 2.1 Billion, no doubt receiving a boost from its subsidiaries. Many would love to see the performance of KenolKobil’s Kenyan unit, but management declined to release the figures showing the contribution of each country by profits.

Gross Profit Margins was down 2.2% to 4.54%. Its fellow listed oil marketer had Gross Profit Margins of 8.1%

Total Assets were up 17.7% to Kshs. 35.76 Billion

	HALF YEAR 2010 Kshs.	HALF YEAR 2011 Kshs.	% CHANGE
TURNOVER	39 BILLION	44.72 BILLION	+14.7%
COST OF SALES	28.6 BILLION	36.3 BILLION	+26.8%
GROSS PROFIT	2.63 BILLION	2.03 BILLION	-23%
GROSS PROFIT MARGIN	6.76%	4.54%	-2.2%
DEPRECIATION AND AMORTISATION	444.7 MILLION	530 MILLION	+19.2%
OPERATING PROFIT	1.02 BILLION	515.5 MILLION	-49.7%
NET FINANCE COSTS	543.3 MILLION	396 MILLION	-27.1%
NET PROFIT	302.3 MILLION	79.7 MILLION	-73.6%

The company attributed the reduced performance to various challenges facing the oil industry in Kenya, key among them the impact of price controls that were introduced in December 2010.

TOTAL also blamed inefficiencies in the fuel supply chain

Sales Volumes were down 13.7% from 493 KMT to 425 KMT. The rise in Turnover was as a result of an increase in product costs due to high international oil prices

Other Income rose by 790% from Kshs. 40.5 Million to Kshs. 360.4 Million, including Kshs. 200 Million from the disposal of company assets as was stipulated by the Government of Kenya during the acquisition of the Chevron business

Finance costs decreased due to lower average interest rates compared to the same period in 2010

The weakening of the Kenya shilling played its part resulting in TOTAL’s operating expenses rising by 11% due to foreign-currency denominated costs

The company still has a Medium Term Loan of Kshs. 702 Million in its books. Short Term Borrowings shot up by 141% to Kshs. 14.2 Billion from Kshs. 5.9 Billion. This was to finance higher Working Capital requirements as a result of the rise in International oil prices

Cash generated from operations is at negative Kshs. 8 Billion. The closing cash position for the period is Kshs 14.1 Billion compared to Kshs. 10.5 Billion as at 30^th June 2010

TOTAL paid Kshs. 396 Million in interest, from Kshs. 543 Million in the corresponding half in 2010

Management blamed the Energy Regulatory Commission for underestimating costs in their formula for determining maximum pump prices and the lag effect between rising international prices and the period when they are recognized in the formula

The short-term to medium-term picture looks gloomy for TOTAL and its Managing Director, Alex Vovk, is hoping for a “reasonable solution to be implemented by the Government to address shortfalls in the pricing formula”

The firm also continues to service loans it took for acquiring the Chevron business

TOTAL KENYA’s market share now stands at 22.6% from 27.6% in June 2010

Half Year Earnings Per Share is at Kshs. 0.46/=

At the price as at 25^th August 2011, the share is trading at a Forward Price Earnings ratio of 23.4

Meanwhile, assuming a Full Year Earnings Per Share of 1.95/= for KenolKobil, it is trading at a forward P.E of 5.4

STANDARD CHARTERED BANK OF KENYA HALF YEAR 2011 ANALYSIS

2011-08-25T09:40:00.000+03:00

Yesterday evening Standard Chartered Bank Of Kenya (SCBK) announced its financial results for the Half Year ending June 30^th 2011

Profit Before Tax slumped 14.4% to hit Kshs. 3.47 Billion. Profit After Tax is now at Kshs. 2.5 Billion, 11.9% less than the corresponding period last year

The Bank was hit by the rise in interest rates which caused the value of SCBK’s bond portfolio to reduce

SCBK reduced its investment in Government Securities by 40.4% to Kshs. 31.5 Billion from Kshs. 52.8 Billion

Cost:Income ratio rose from 42.53% to 51.37%. It was helped on its way by the 22.2% rise in Total Operating Expenses to Kshs. 3.66 Billion from the previous year’s Kshs. 3 Billion

These were not the sort of results SCBK shareholders were hoping for, but the surge in Net Loans and Advances, which went up by Kshs. 33.4 Billion or 66.6%, is bound to put a smile on their faces

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	131.2 BILLION	153.3 BILLION	+16.8%
NET LOANS AND ADVANCES	50.2 BILLION	83.7 BILLION	+66.6%
CUSTOMER DEPOSITS	98.9 BILLION	109 BILLION	+10.5%
LOAN:DEPOSIT RATIO	50.81%	76.61%	+25.8%
TOTAL INTEREST INCOME	5.05 BILLION	5.08 BILLION	+0.6%
TOTAL INTEREST EXPENSE	1.05 BILLION	523 MILLION	-50.4%
NET INTEREST INCOME	4 BILLION	4.5 BILLION	+12.4%
TOTAL OPERATING INCOME	7.05 BILLION	7.13 BILLION	+1.2%
TOTAL OPERATING EXPENSE	3 BILLION	3.66 BILLION	+22.2%
COST:INCOME RATIO	42.53%	51.37%	+8.8%
PROFIT BEFORE TAX	4.05 BILLION	3.5 BILLION	-14.4%
PROFIT AFTER TAX	2.84 BILLION	2.5 BILLION	-11.9%

Customer Deposits were up 10.5% to Kshs. 109 Billion.

The surge in Net Loans and advances pushed up the Loan:Deposit ratio to 76.61% from 50.81%

Interest Income from Loans and Advances as a percentage of Total Interest Income stands at 72.26% in comparison with 58.22% in H1 2010.

With the reduction of investment in Government Securities, interest income from them now comprise 25.69% of Total Interest Income, down from 38.37% in the corresponding half last year

Foreign Exchange Income was up 4.5% to Kshs. 847 Million

Total Fees and Commissions were significantly up by 55.3%, from Kshs. 1.13 Billion to Kshs. 1.76 Billion as a result of “significant growth in loans and advances, trade finance and improved revenues from our custodial business”

Net Non Performing loans were cut by half to Kshs. 313 Million

Total Interest Expenses was down a huge 50.4% to Kshs. 523 Million after the bank significantly cut its cost of funds

‘Other Income’ fell by 13.77% to, following the rise in interest rates which devalued the bond portfolio

Staff Costs registered a slight increase of 4.6% to stand Kshs. 1.7 Billion

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	2.45 BILLION	2.63 BILLION	+7.3%
TOTAL INTEREST EXPENSE	242.6 MILLION	280.6 MILLION	+15.7%
NET INTEREST INCOME	2.2 BILLION	2.32 BILLION	+5.0%
TOTAL OPERATING INCOME	4.11 BILLION	3.02 BILLION	-26.5%
TOTAL OPERATING EXPENSE	1.8 BILLION	1.87 BILLION	+4.0%
COST:INCOME RATIO	43.69%	61.83%	+18.1%
PROFIT BEFORE TAX	2.31 BILLION	1.15 BILLION	-50.2%
PROFIT AFTER TAX	1.64 BILLION	859.4 MILLION	-47.6%

The Quarter on Quarter analysis lays bare the tough Q2 that SCBK experienced. Cost:Income ratio for the 2^nd Quarter alone is at 61.83%, from 43.7% in Q1

The Bank made 50.2% less in Profit Before Tax in Q2 2011 than in Q1 2011 and 47.6% less in Profit After Tax

Earnings Per Share was down 16.6% to 8.71/=

With yesterday’s closing price of Kshs. 209/=, the bank is trading a Forward P.E of 12, way above of its peers

NIC BANK HALF YEAR 2011 ANALYSIS

2011-08-18T20:21:00.000+03:00

Today morning NIC BANK announced its financial results for the Half Year ending June 30^th 2011

In comparison to the half year period ending 30^th June 2010, Profit Before Tax rose by 33% to Kshs. 1.6 Billion. Profit After Tax was up 34% to Kshs. 1.1 Billion

Earnings Per Share is at Kshs. 2.65/=

Subsidiaries which include NIC Bank Tanzania, NIC Capital, NIC Securities and NIC Insurance Agents contributed Kshs. 67.8 Million to the Profit After Tax, equivalent to 6.2% of PAT. This is an improvement from the Kshs. 49.2 Million they contributed in the previous half year

Cost management improved from the already impressive figures the previous year

Cost:Income ratio was down 3.9% to stand at 46.22%, easily beating Diamond Trust Bank’s 51.4 which was until now the lowest of the NSE listed banks which have released their Half Year results.

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	54.7 BILLION	67.8 BILLION	+24%
NET LOANS AND ADVANCES	35.8 BILLION	47.3 BILLION	+32.2%
CUSTOMER DEPOSITS	44 BILLION	55.5 BILLION	+26.1%
LOAN:DEPOSIT RATIO	81.24%	85.1%	+3.9%
TOTAL INTEREST INCOME	2.36 BILLION	2.72 BILLION	+15.1%
TOTAL INTEREST EXPENSE	910.4 MILLION	783 MILLION	-14%
NET INTEREST INCOME	1.45 BILLION	1.9 BILLION	+33.3%
TOTAL OPERATING INCOME	2.4 BILLION	3 BILLION	+23.3%
TOTAL OPERATING EXPENSE	1.2 BILLION	1.4 BILLION	+13.6%
COST:INCOME RATIO	50.14%	46.22%	-3.9%
PROFIT BEFORE TAX	1.2 BILLION	1.6 BILLION	+33%
PROFIT AFTER TAX	818 MILLION	1.1 BILLION	+34%

The rise in Net Loans and Advances, which was up 32.2%, enabled NIC to increase its Interest Income from Loans and Advances by 17.9% to Kshs. 2.45 Billion, which represents 90% of Total Interest Income

Interest Income from Government Securities dropped 6.6% to Kshs. 215 Million from Kshs. 231 Million

Net Non Performing Loans was up 115% to Kshs. 433 Million from Kshs. 202 Million

Foreign Exchange Income was up 19.5% to Kshs. 362.6 Million

Total Fees and Commissions surged by 45.8%, from Kshs. 307 Million to Kshs. 448 Million

Staff Costs registered an increase of 17.3% to stand at Kshs. 715 Million

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	1.3 BILLION	1.4 BILLION	+6.4%
TOTAL INTEREST EXPENSE	362.3 MILLION	420.9 MILLION	+16.2%
NET INTEREST INCOME	954 MILLION	980 MILLION	+2.7%
TOTAL OPERATING INCOME	1.43 BILLION	1.55 BILLION	+8.1%
TOTAL OPERATING EXPENSE	627.3 MILLION	748.8 MILLION	+19.4%
COST:INCOME RATIO	43.85%	48.42%	+4.6%
PROFIT BEFORE TAX	803.3 MILLION	797.7 MILLION	-0.7%
PROFIT AFTER TAX	550 MILLION	545.7 MILLION	-0.8%

But it seems NIC will face a tough 2^nd Half of the year if their Q2 performance is anything to go by.

Interest Expenses and Operating Expenses were up by 16.2% and 19.4% respectively, higher than the rate of growth of Interest Income and Operating Income which was at 6.4% and 8.1% respectively

This resulted in Cost:Income ratio for Q2 2011 rising to 48.42% from 43.85% in Q1 2011. This however, is still low by industry standards.

The Bank made slightly less profit in Q2 2011 than Q1 2011 as a result of the rise in Expenses.

At the closing price of 33.50, the bank is trading at a forward P.E of 6.32

CFC STANBIC BANK HALF YEAR 2011 ANALYSIS

2011-08-12T12:14:00.004+03:00

CFC Stanbic Holdings Limited released their results for the Half Year period ending June 30^th 2011 on Wednesday 11^th August.

I took a look at the figures for CFC Stanbic Bank as an entity on its own

Profit Before Tax was up 21.2% to Kshs. 1.4 Billion. Profit After Tax rose 16%, hitting Kshs. 841.3 Million

Total Assets were up by 14.5% to stand at Kshs. 117.4 Billion

Net loans and advances surged 40.6% to Kshs. 68 Billion, improving the Loan:Deposit ratio to 87.1%, from 60% for a similar period last year

The bank however is struggling to raise deposits in a tough environment. Customer Deposits were down 2.9% from Kshs. 80.7 Billion to Kshs. 78.3 Billion

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	102.5 BILLION	117.4 BILLION	+14.5%
NET LOANS AND ADVANCES	48.5 BILLION	68.2 BILLION	+40.6%
CUSTOMER DEPOSITS	80.7 BILLION	78.3 BILLION	-2.9%
LOAN:DEPOSIT RATIO	60%	87.1%	+27%
TOTAL INTEREST INCOME	3.05 BILLION	3.56 BILLION	+16.5%
TOTAL INTEREST EXPENSE	1.2 BILLION	843.6 MILLION	-31.6%
NET INTEREST INCOME	1.82 BILLION	2.71 BILLION	+49.1%
TOTAL OPERATING INCOME	4.55 BILLION	4.66 BILLION	+2.5%
TOTAL OPERATING EXPENSE	3.39 BILLION	3.26 BILLION	-3.9%
COST:INCOME RATIO	74.56%	69.92%	-4.6%
PROFIT BEFORE TAX	1.2 BILLION	1.4 BILLION	+21.2%
PROFIT AFTER TAX	725 MILLION	841 MILLION	+16%

Net Non Performing loans were down 53.4% to Kshs. 448 Million from Kshs. 961 Million

Like Barclays Bank of Kenya, CFC Stanbic Bank registered a drop in Customer Deposits for its half year period. But unlike Barclays, CFC managed to ramp up its Net Loans and Advances by 40.6%, a sector in which Barclays’ growth was flat

The Cost:Income ratio was down 4.6%, but is still high at 69.92%

Foreign Exchange trading income was down 10% to Kshs. 673 Million, a surprise considering the assertion that banks were going to cash in big time on the volatility of the Kenya shilling

Staff Costs was significantly reduced by 34.4% to Kshs. 668 Million from slightly over a Billion

Fees and Commissions were also down 7.4% to Kshs. 733 Million

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	1.66 BILLION	1.89 BILLION	+13.8%
TOTAL INTEREST EXPENSE	445 MILLION	399 MILLION	-10.3%
NET INTEREST INCOME	1.2 BILLION	1.5 BILLION	+22.6%
TOTAL OPERATING INCOME	2.1 BILLION	2.5 BILLION	+19.3%
TOTAL OPERATING EXPENSE	1.61 BILLION	1.64 BILLION	+1.3%
COST:INCOME RATIO	76.2%	64.7%	-11.5%
PROFIT BEFORE TAX	506 MILLION	896 MILLION	+76.9%
PROFIT AFTER TAX	347 MILLION	494 MILLION	+42.2%

Rising inflation numbers didn’t seem to affect CFC in the 2^nd Quarter of 2011. Both Profit Before Tax and Profit After Tax surged in the 2^nd Quarter from Q1 2011.

Interest Expense also came down. This coupled with the rise in income, resulted in Q2 Cost:Income ratio going down by 11.5%

Earnings Per Share for the bank rose 16% to 6.89/= for the half year

DIAMOND TRUST BANK HALF YEAR 2011 ANALYSIS

2011-08-09T12:45:00.003+03:00

Today morning Diamond Trust Bank Kenya Group (DTBK) announced its financial results for the Half Year ending June 30^th 2011

Profit Before Tax rose by 20.8% to hit Kshs. 2.1 Billion. Profit After Tax was up 15.2% to Kshs. 1.34 Billion

Earnings Per Share though was down 4% to Kshs. 6.84/= from Kshs. 7.12/= as a result of the 1:5 bonus that DTBK issued to shareholders. This increased the number of issued shares to 195,644,530.

Subsidiaries in Uganda, Tanzania and Burundi contributed Kshs. 158 Million to the Profit After Tax, almost 12% of the total profit. They plan to have at least 100 branches across East Africa by the end of 2013

Overall, this is a very polished performance from DTBK.

The bank treated us to the same level of efficiency that we have seen from it in the past. Cost:Income ratio was down 2.8% to stand at 51.4%, by far the lowest of the NSE listed banks which have released their Half Year results.

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	76 BILLION	94.4 BILLION	+24.2%
NET LOANS AND ADVANCES	48.2 BILLION	63.7 BILLION	+32%
CUSTOMER DEPOSITS	61.7 BILLION	76 BILLION	+23.1%
LOAN:DEPOSIT RATIO	78.1%	83.8%	+5.7%
TOTAL INTEREST INCOME	3.6 BILLION	4.1 BILLION	+14.7%
TOTAL INTEREST EXPENSE	1.4 BILLION	1.18 BILLION	-15.9%
NET INTEREST INCOME	2.2 BILLION	2.95 BILLION	+34.3%
TOTAL OPERATING INCOME	3.7 BILLION	4.2 BILLION	+13.9%
TOTAL OPERATING EXPENSE	2 BILLION	2.2 BILLION	+8.1%
COST:INCOME RATIO	54.2%	51.4%	-2.8%
NET NON PERFORMING LOANS	149 MILLION	38 MILLION	-74.5%
PROFIT BEFORE TAX	1.7 BILLION	2.1 BILLION	+20.8%
PROFIT AFTER TAX	1.16 BILLION	1.34 BILLION	+15.2%

Customer Deposits was up 23.1% to Kshs. 76 Billion.

The increased deposit base allowed DTBK to advance more loans to customers. Net Loans and Advances was up 32% to Kshs. 63.7 Billion

Foreign Exchange Income was up 15.5% to Kshs. 421 Million

Total Fees and Commissions surged by 40.3%, from Kshs. 485 Million to Kshs. 681 Million

Interest Expenses was down 15.9%

Staff Costs registered an increase of 10.2% to 832.3 Million

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	1.9 BILLION	2.2 BILLION	+14.4%
TOTAL INTEREST EXPENSE	561.2 MILLION	619.3 MILLION	+10.4%
NET INTEREST INCOME	1.36 BILLION	1.58 BILLION	+16.1%
TOTAL OPERATING INCOME	2 BILLION	2.2 BILLION	+8.1%
TOTAL OPERATING EXPENSE	1.15 BILLION	1.02 BILLION	-11.5%
COST:INCOME RATIO	56.7%	46.4%	-10.3%
PROFIT BEFORE TAX	879.5 MILLION	1.18 BILLION	+33.8%
PROFIT AFTER TAX	520 MILLION	818 MILLION	+57.3%

If you look at DTBK’s Cost:Income for Q2 2011 only, it falls further to 46.4%

Coupled with the fact that it made significantly more in profits in Q2 2011 than it did Q1 2011, this makes for a very impressive 2^nd Quarter of the Year

The Bank made 57.3% more in Profit After Tax in Q2 2011 than in Q1 2011

As at 12.45 p.m. the share is down 4.76% and is now at Kshs. 100/=

This gives DTBK a Forward P.E of 7.31

NATIONAL BANK OF KENYA HALF YEAR 2011 ANALYSIS: PROFIT AFTER TAX DOWN 21.6%

2011-08-06T00:22:00.001+03:00

On Wednesday 3^rd August, National Bank of Kenya (NBK) announced its financial results for the Half Year ending June 30^th 2011

Profit After Tax slumped 21.6% to Kshs. 640.3 Million. Profit Before Tax was down 8.1% from Kshs. 1.2 Billion the previous half to Kshs. 1.1 Billion

This set of results cannot be described as anything other than disappointing.

The Cost:Income ratio increased to 70.9% from 62.9%

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	59.4 BILLION	66.3 BILLION	+11.6%
NET LOANS AND ADVANCES	15.5 BILLION	24.5 BILLION	+58.1%
CUSTOMER DEPOSITS	46.4 BILLION	50.2 BILLION	+8.2%
LOAN:DEPOSIT RATIO	33.4%	48.8%	+15.4%
TOTAL INTEREST INCOME	2.91 BILLION	3.1 BILLION	+6.4%
TOTAL INTEREST EXPENSE	656.6 MILLION	422.8 MILLION	-35.6%
NET INTEREST INCOME	2.25 BILLION	2.67 BILLION	+18.6%
TOTAL OPERATING INCOME	3.2 BILLION	3.8 BILLION	+17.1%
TOTAL OPERATING EXPENSE	2 BILLION	2.7 BILLION	+31.9%
COST:INCOME RATIO	62.9%	70.9%	+8%
NET NON PERFORMING LOANS	246.1 MILLION	305.6 MILLION	+24.2%
PROFIT BEFORE TAX	1.2 BILLION	1.1 BILLION	-8.1%
PROFIT AFTER TAX	816.3 MILLION	640.3 MILLION	-21.6%

NBK derived almost half (48.7%) of their Total Interest Income of Kshs. 3.1 Billion from interest from Government Securities. This underlines their dependence on Government Securities. Equity only had Government Securities contributing 13.3% of their Total Interest Income.

It definitely is a major concern to shareholders that the bank derives as much from lending as it does from Interest from Government Securities

Though Net Loans and Advances surged by 58.1%, the Loan:Deposit ratio is still at 48.8%, by far the lowest among NSE listed banks that have released their results. This however is a huge improvement since as the ratio was at 33.4% for the Half Year ending June 30^th 2010

Forex Income was up by 25.7% to Kshs. 184.6 Million

Staff Costs were up by 15.5% to hit Kshs. 1.34 Billion

Fees and Commissions rose by 17.4% and are now at the Kshs. three-quarter billion mark

The Operating Expenses are grew nearly twice as much as the Operating Income

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	1.5 BILLION	1.59 BILLION	+6.5%
TOTAL INTEREST EXPENSE	189.4 MILLION	233.5 MILLION	+23.3%
NET INTEREST INCOME	1.31 BILLION	1.36 BILLION	+4.0%
TOTAL OPERATING INCOME	1.87 BILLION	1.91 BILLION	+2.4%
TOTAL OPERATING EXPENSE	1.4 BILLION	1.28 BILLION	-8.9%
COST:INCOME RATIO	75%	66.8%	-8.2%
PROFIT BEFORE TAX	467.2 MILLION	635.9 MILLION	+36.1%
PROFIT AFTER TAX	231.5 MILLION	408.9 MILLION	+76.6%

As did Barclays Bank of Kenya, though NBK posted a drop in profits in comparison with the previous half, they posted very strong Quarter on Quarter growth

Cost:Income ratio also came down from 75% in Q1 2011 to 66.8% in Q2 2011

Interest Expenses were up 23.3% from the previous quarter however.

Management needs to ensure that more Customer Deposits are being lent out than they are at this particular point in time. A Loan:Deposit ratio of less than 50% does not do it any good with investors

The Government of Kenya is still looking for a suitor for its stake in NBK. This process has taken too long and with probably an impending big dilution when it finally happens, share price unlikely to receive much interest for now

ACCESS KENYA HALF YEAR 2011 RESULTS ANALYSIS: TURNOVER SLIGHTLY DOWN BUT PROFIT AFTER TAX DOUBLES

2011-08-05T15:41:00.000+03:00

Access Kenya has released their Half Year results for the period ended 30^th June 2011.

Profit After Tax doubled to Kshs. 61.7 Million. Profit Before Tax rose by 90.8% to Kshs. 76.5 Million from Kshs. 40.1 Million for the previous half

Turnover however was down 2.8% to Kshs. 852 Million

H1 2010 vs. H1 2011

	HALF YEAR 2010 Kshs.	HALF YEAR 2011 Kshs.	% CHANGE
TURNOVER	876.3 MILLION	852 MILLION	-2.8%
COST OF SALES	278.3 MILLION	169.2 MILLION	-39.2%
GROSS PROFIT	598 MILLION	682.9 MILLION	+14.2%
ADMINISTRATIVE EXPENSES	347 MILLION	375.3 MILLION	+8.2%
EBITDA	251 MILLION	307.5 MILLION	+22.5%
PROFIT BEFORE TAX	40.1 MILLION	76.5 MILLION	+90.8%
PROFIT AFTER TAX	30.7 MILLION	61.7 MILLION	+101.3%

Both Corporate and Residential internet revenues increased over the half year.

I.T revenues declined while revenues from the internet decision grew. This, management noted, was as a result of the company de-emphasising the low margin hardware sales.

Net Financing Costs rose by 35.4% to Kshs. 54.8 Million. The company said this was due to the conversion of low interest rate dollar borrowing to shilling to reduce the Foreign Exchange exposure. Access Kenya is now confident that it has substantially mitigated its FOREX exposure. Indeed, exchange losses were down 42.9% to Kshs. 28.4 Million.

Total Assets in comparison to the Half Year 2010, was down 6.4%to Kshs. 1.74 Billion. For the 6 month period to 30^th June 2011 however, Total Assets was up 7.7%

Net cash from operating activities was down 69.5% to Kshs. 43 Million from Kshs. 141 Million.

The closing cash position was further depressed to a negative cash position of Kshs. 154.2 Million, from the previous half negative Kshs. 83.3 Million.

Depreciation increased by 22.5% due to the impact of their network investment.

The rise in Earnings Before, Interest, Taxes, Depreciation and Amortisation (EBITDA) was attributed to careful cost management that ensured administrative expenses rose by a lower rate than Gross Profit growth.

During the period under review, the company was able to renegotiate and restructure bandwidth leases which were executed towards the end of last year. This signifies cheaper bandwidth rates for Access Kenya.

Management reiterated their focus on growing revenues.

My view is that Access Kenya will have it very rough from competition over the next few years, key among them Safaricom Business. The drop in Cost of Sales though looks set to push them into Full Year 2011 profitability. They made a loss of Kshs. 8 Million for the Full Year 2010

THE CO-OPERATIVE BANK OF KENYA HALF YEAR 2011 ANALYSIS

2011-08-03T15:29:00.002+03:00

The Co-operative Bank of Kenya (Co-op Bank) today morning announced its financial results for the Half Year ending June 30^th 2011

Profit Before Tax rose by 42.4% to Kshs. 4.15 Billion. Profit After Tax was up by an equally impressive 41.3%, hitting Kshs. 3.31 Billion

Total Assets were up by 23.4% to stand at Kshs. 164 Billion

The loan book also grew at a brisk pace. Net loans and advances was up 35.8%

Net Interest Income was up by a more than respectable 46.4%

Total Operating expenses was up 28.7%, but this was offset by a 33.1% in Total Operating Income

Net-Non Performing Loans reduced to 1.45 Billion, representing a 14.4% decline

Bank accounts now stand at 2.2 Million accounts, up from 1.4 Million accounts, thanks in no small part due to their all inclusive bank staff initiative. This represents an over 57% growth.

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	133.6 BILLION	164.8 BILLION	+23.4%
NET LOANS AND ADVANCES	70 BILLION	95 BILLION	+35.8%
CUSTOMER DEPOSITS	109.7 BILLION	130.7 BILLION	+19.2%
LOAN:DEPOSIT RATIO	63.9%	72.8%	+8.9%
TOTAL INTEREST INCOME	5.5 BILLION	7.3 BILLION	+31.5%
TOTAL INTEREST EXPENSE	1.47 BILLION	1.33 BILLION	-9.7%
NET INTEREST INCOME	4.07 BILLION	5.96 BILLION	+46.4%
TOTAL OPERATING INCOME	7 BILLION	9.3 BILLION	+33.1%
TOTAL OPERATING EXPENSE	4.1 BILLION	5.3 BILLION	+28.7%
COST:INCOME RATIO	58.5%	56.5%	-2%
NET NON PERFORMING LOANS	1.7 BILLION	1.45 BILLION	-14.4%
PROFIT BEFORE TAX	2.91 BILLION	4.15 BILLION	+42.4%
PROFIT AFTER TAX	2.34 BILLION	3.31 BILLION	+41.3%

Co-op Bank saw a strong growth in Customer deposits by almost 20% to Kshs. 130.7 Billion

Staff costs went up by 20.9 % to Kshs. 2.55 Billion from Kshs. 2.1 Billion

Total Fees & Commissions rose by 16.4% to Kshs. 2.53 Billion

Not surprisingly, Co-op Bank made a healthy return from Foreign Exchange Trading income. FOREX

Trading Income rose by 43.9% to Kshs. 539 Million

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	3.46 BILLION	3.83 BILLION	+10.7%
TOTAL INTEREST EXPENSE	605.8 MILLION	723.3 MILLION	+19.4%
NET INTEREST INCOME	2.85 BILLION	3.1 BILLION	+8.9%
TOTAL OPERATING INCOME	4.58 BILLION	4.75 BILLION	+3.5%
TOTAL OPERATING EXPENSE	2.54 BILLION	2.74 BILLION	+8.0
COST:INCOME RATIO	55.3%	57.7%	+2.4
PROFIT BEFORE TAX	2.05 BILLION	2.1 BILLION	+2.4%
PROFIT AFTER TAX	1.64 BILLION	1.67 BILLION	+1.5%

For all their impressive growth from their previous half, Co-op Bank posted modest Quarter on Quarter growth. This goes to show the impact of inflation started to be felt by most banks in Q2 2011.

Operating Expense & Interest Expense grew faster than Operating Income & Interest Income respectively

Co-op Bank registered only a slight increase in Profit Before Tax and Profit After Tax, Quarter on Quarter

The Branch network now stands at 89. ATM networks are now accessible in over 410 service points.

On the agency banking platform, 440 Agents have been approved by the Central Bank of Kenya, with the bank targeting over 2000 by year end.

With a 21% shareholding in CIC Insurance, Co-op bank will definitely benefit from the growth of the insurance industry in Kenya.

BARCLAYS BANK OF KENYA HALF YEAR 2011 ANALYSIS

2011-08-03T12:27:00.005+03:00

Today morning saw Barclays Bank of Kenya (BBK) announce its financial results for the Half Year ending June 30^th 2011

Profit Before Tax rose by 12.6% to stand at Kshs. 5.35 Billion. Profit After Tax, though, was down 2%, at Kshs. 3.64 Billion. Earnings Per Share was at 0.67/= An interum dividend of 0.20/= was declared

The tough operating environment is clearly giving BBK a rough time. This is seen in customer deposits going down by 1.6% to Kshs. 128.4 Billion

The cost income ratio has come down from 64% to 57.2% during the period. Staff costs went down by 15.4% to Kshs. 3.7 Billion from Kshs. 4.38 Billion the previous half. Speaking during the release of the results, Barclays C.E.O Adan Mohammed noted that “Operational efficiency following investments in IT has resulted in a significant drop in our operating expenses; this has resulted in staff cost savings”

Loan loss provision reduced from 702 Million to 393 Million.

Mr. Mohammed said that BBK aims to maximise returns to shareholders through greater operational efficiency; better risk management; deeper client relationships and superior customer service”

The results however, offer little encouragement to shareholders

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	172.7 BILLION	176.5 BILLION	+2.2%
NET LOANS AND ADVANCES	91.6 BILLION	91.8 BILLION	+0.3%
CUSTOMER DEPOSITS	130.6 BILLION	128.4 BILLION	-1.6%
LOAN:DEPOSIT RATIO	70.1%	71.5%	+1.4%
TOTAL INTEREST INCOME	9.2 BILLION	7.8 BILLION	-15.5%
TOTAL INTEREST EXPENSE	869 MILLION	414 MILLION	-52.4%
NET INTEREST INCOME	8.4 BILLION	7.4 BILLION	-11.6%
TOTAL OPERATING INCOME	13.2 BILLION	12.5 BILLION	-5.5%
TOTAL OPERATING EXPENSE	8.5 BILLION	7.1 BILLION	-15.6%
COST:INCOME RATIO	64%	57.2%	-6.8%
NET NON PERFORMING LOANS	1.8 BILLION	807 MILLION	-56.1%
PROFIT BEFORE TAX	4.75 BILLION	5.35 BILLION	+12.6%
PROFIT AFTER TAX	3.7 BILLION	3.6 BILLION	-2%

The drop in customer deposits is definitely worrying for both management and shareholders. Kenya Commercial Bank had an increase of 12.4% in customer deposits while Equity Bank a 59.4% rise. With no regional subsidiaries to fall on, BBK will struggle to raise deposits in the harsh Kenyan operating environment

Foreign Exchange Income was up 12.9% to Kshs. 1.34 Billion. This was expected as the Kenya Shilling experienced a lot of volatility among major world currencies

Total Fees and Commissions was down 7.5% to Kshs. 3.42 Billion from Kshs. 3.7 Billion

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	3.9 BILLION	4.0 BILLION	+2.2%
TOTAL INTEREST EXPENSE	181.2 MILLION	232.5 MILLION	+28.3%
NET INTEREST INCOME	3.68 BILLION	3.71 BILLION	+0.9%
TOTAL OPERATING INCOME	6.2 BILLION	6.3 BILLION	+1.6%
TOTAL OPERATING EXPENSE	3.78 BILLION	3.34 BILLION	-11.6%
COST:INCOME RATIO	61.2%	53.2%	-8%
PROFIT BEFORE TAX	2.4 BILLION	2.94 BILLION	+22.3%
PROFIT AFTER TAX	1.53 BILLION	2.11 BILLION	+37.7%

The Quarter on Quarter figures however, gives a less gloomy picture.

Total Interest Expense was down 28.3% with management hailing investments in IT as the reason. This resulted in Cost:Income improving to 53.3%

Profit Before Tax was up 22.3% from the previous quarter. Profit After Tax was up 37.7% from Q1 2011.

Management issued a cautionary note for the forthcoming periods “as the economy enters into a period of higher inflation and an interest rate environment which may impact businesses in the coming months”

With no more custodial businesses to sell, investors might be forgiven for scampering for safety.

KENYA COMMERCIAL BANK HALF YEAR 2011 ANALYSIS PROFIT BEFORE TAX UP 36.4%

2011-07-28T16:23:00.007+03:00

Today afternoon saw the Kenya Commercial Bank Group (KCB) announce its financial results for the Half Year ending June 30^th 2010

KCB announced a Profit Before Tax of Kshs. 5.74 Billion, a 36.4% jump. Profit After Tax came in at Kshs. 4.1 Billion, this a rise of 41.6%

Speaking during the release of the bank’s half year trading results, management noted that the group will continue to rely on technology and innovation to improve returns. The KCB Chairman said that the “…transformation process is important to enhance efficiency in line with industry best practice”

The bank has already partnered 700 agents with 400 more in the pipeline. KCB aims to rival Equity Bank which has already built up a network of 2,300 agents across the country

The cost income ratio has come down from 69.6% to 66% during the period.

Group Chief Executive Officer Martin Oduor Otieno said that all subsidiaries are now in the profit zone, as opposed to the 2010 Full Year when they dug a hole of Kshs. 1.7 Billion in Profit Before Tax.

KCB had a rights issue mid last year which raised Kshs. 12.5 billion out of a targeted Kshs. 15 billion. KCB then embarked on a mission to distribute some of the money to its struggling subsidiaries to give them a boost. The move seems to be paying off.

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	226.1 BILLION	279.7 BILLION	+31.3%
NET LOANS AND ADVANCES	130 BILLION	175.2 BILLION	+34.8%
CUSTOMER DEPOSITS	191.9 BILLION	215.7 BILLION	+12.4%
LOAN:DEPOSIT RATIO	67.7%	81.2%	+19.9%
TOTAL INTEREST INCOME	10.9 BILLION	11.8 BILLION	+7.9%
TOTAL INTEREST EXPENSE	2.2 BILLION	1.2 BILLION	-42.3%
NET INTEREST INCOME	8.8 BILLION	10.5 BILLION	+20.3%
TOTAL OPERATING INCOME	13.8 BILLION	16.9 BILLION	+21.9%

With the Kenya Shilling experiencing huge volatility against major currencies, it will come as a surprise that Forex trading income was up only a paltry 8.8% to Kshs. 1.25 Billion from Kshs. 1.36 Billion. Equity Bank saw its Forex income jump by a whopping 135.4% to Kshs. 683.4 Million. The 2 are rumoured to be part of the banks which the Central Bank of Kenya accused of manipulating the Kenya Shilling

Staff costs went up by 22.65% to Kshs. 5.4 Billion. Investors will hope that this is only as a result of the recent restructuring which led to executives receiving severance pay

The Chief Executive Officer was delighted with the growth of fees and commissions by 26%, from Kshs. 1.46 Billion to Kshs. 1.84 Billion. He noted that this segment had been a cause for concern in the past and had indeed been sluggish

Government Securities holdings decreased by 13.8% to Kshs. 3.8 Billion. Interest from Government Securities thus dropped to Kshs. 1.9 Billion from Kshs. 2.3 Billion

Customer Deposits rose by 12.4%, but this did not stop Net Loans and Advances going up by 34.8%

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	5.7 BILLION	6.1 BILLION	+6.3%
TOTAL INTEREST EXPENSE	597.4 MILLION	649.8 MILLION	+8.8%
NET INTEREST INCOME	5.1 BILLION	5.4 BILLION	+6.1%
TOTAL OPERATING INCOME	7.9 BILLION	9 BILLION	+13.3%
TOTAL OPERATING EXPENSE	5.4 BILLION	5.7 BILLION	+6.0%
COST:INCOME RATIO	68.3%	66%	-2.3%
PROFIT BEFORE TAX	2.5 BILLION	3.2 BILLION	+29%
PROFIT AFTER TAX	1.8 BILLION	2.3 BILLION	+28.7%

KCB’s Quarter on Quarter growth seems much stronger than Equity Bank’s, especially on the Profit Before Tax and Profit After Tax where it registered a Q2 vs. Q1 growth of 29% & 28.7% respectively in comparison with Equity’s 2% & 2.5% respectively. It will certainly be interesting to see the figures for the next quarter

The bank though seems to be a long way from achieving a Cost:Income ratio of below 50%

KCB is set to roll out its mortgage business in Tanzania in August and South Sudan in 2012. It has already established mortgage units in Rwanda and Uganda

At the half year point, KCB trails Equity Bank which on Monday this week announced a Profit Before Tax of Kshs. 5.84 Billion, a growth of 51.8% (See EQUITY BANK HALF YEAR 2011 ANALYSIS EARNINGS UP 57.4% BUT INFLATION START TO BITE)

The margin of difference though now stands at Kshs. 100 Million while Going by the 1^st Quarter 2011 results, it stood at Kshs. 390 Million

Away from the financial matters, the CEO announced that all board members contributed Kshs. 10,000 to the Kenyans4Kenya campaign to feed those faced with starvation

KENOL KOBIL HALF YEAR 2011 RESULTS

2011-07-26T22:59:00.003+03:00

Today afternoon KenolKobil announced their results for the half-year period ending June 30^th 2011.

It was a blistering half by KenolKobil and shareholders have been rewarded by an interim dividend of 57 cents which is more than the full year dividend for 2010 full financial year which amounted to 52 cents

	HALF YEAR 2011 Kshs.	HALF YEAR 2010 Kshs.	% CHANGE
SALES	83.3 BILLION	60.3 BILLION	+38.1%
COST OF SALES	76.6 BILLION	56 BILLION	+36.5%
GROSS PROFIT	6.7 BILLION	4.3 BILLION	+58.1%
GROSS PROFIT MARGIN	8.1%	7.1%	+1%
ADMINISTRATIVE AND OPERATING COSTS	1.8 BILLION	1.3 BILLION	+33.2%
OPERATING PROFITS	4.5 BILLION	2.4 BILLION	+89.6%
PROFIT BEFORE TAX	3.2 BILLION	1.7 BILLION	+85.8%
PROFIT AFTER TAX	2.1 BILLION	1.2 BILLION	+82.9%

Retained earnings were at Kshs. 7.8 Billion, a jump of 20.4% from last year’s Kshs. 6.5 Billion

Net cash generated from operations jumped from a negative position of Kshs. 5.7 Billion to a positive position of Kshs. 4.1 Billion

The closing cash and cash equivalents was at Kshs. 10.4 Billion, a huge rise from Kshs. 3.9 Billion last year

Management was bullish about the continued contribution of subsidiaries to the bottom line.

As at today’s closing prices, the interim dividend yield is at 5.2%, much more than the full year dividends from the majority of listed companies. No doubt the company will give something greater.

With the 2^nd Half forecast to be better than last year’s, KenolKobil is set to make a Full Year Net Profit of at least Kshs. 2.87 Billion.

That will give it an Earnings Per Share of 1.95/=. At today’s closing price, this will give rise to Forward Price to Earnings ratio of 5.6.