Friday, February 20, 2009

Barclays and the NIC-ex

A few days after Equity led with their 2008 results next comes Barclays Bank Kenya and NIC Bank.

Barclays Kenya have shrugged off a difficult year to report a slight growth in profits while also admitting a slowdown in lending and shift in plans to consolidate after an expansion period that saw the bank go on an expansion splurge in the last two years. Barclays Kenya 2008 profits (PDF)
- Growth of in assets of 3% every quarter of 2008, except Q4 which had a reduction of 2% to end the year. Overall asset growth in 2008 was 7%, while in 2007 it had been was 34%. Assets at December 31 were Kshs. 168.8 billion ($2.1 billion) compared to 172.3 billion at September 2008
- Deposits grew by 12%, 5%, 3% in first three quarters, followed by a decline 5% in Q4 – and overall up 16% for the year - same as in 2007
- Loans were up 3% from 2007
- Income up 25% compared to 24% in 2007
- Expenses up 33% compare to 37% in 2006
- NPA up 22%
- Despite modest growth, edged past Equity as most the capitalized bank

NIC was spun off from Barclays as an asset finance specialist, a business it still dominates while competing against Barclays itself now. The Bank is still in expansion mode with a rebranding under the 1 bank banner as a one stop shop for all their customers business needs. NIC Bank 2008 profits (PDF)

- In 2008, growth in assets was 36%, including 18% in Q1 (while the country was fighting?) and 8% in q4
- Deposits were 42% up from a year ago, again with 17% in Q1 and 10% in Q4
- Loans were up 35% in 2008, with 9% in Q2 and 14% increase in Q3, followed by just 2% in Q4 the lowest (went big on Q3 and decided to slow down in Q4?). NPA's still just 4% of loans
- Despite re-branding, income was up 33% with expenses up 25% in 2008
- Profit was up 41% in 2008, compared to 55% in 2007.

KCB overtook the overtook Barclays as the number one bank, a position it should hold, despite the hit it will take from the link with Triton Oil , the collapsed, scandal ridden oil company. Results should be out in a few days.

Conflicting signals - crunch or not?

KCB’s housing subsidiary Savings & Loan (S&L) extended financing to real estate developers this week, increasing lending limits to Kshs. 250 million ($3.12 million) and willingness to finance of 85% of the construction costs of property developments. Some already wonder if they are contributing to a real estate bubble in Kenya.

Meanwhile there was an offline story in the Standard this week where the MD of listed paint maker, Crown Berger, lamented that banks are behaving strangely, reluctant to lend money, and he was now looking to launch a bond to raise working capital funds for the firm.


coldtusker said...

Banks are reluctant to lend coz of economic problems but GoK offers a nominal 12.5% on the Infrastrcture Bond. So why risk lending?

Public crowding out private investments.

Is KCB headed to another 'Loan Loss Provision' nightmare in 2 years?

BBK has always been more conservative. Their quality of earnings has always been high(er) than KCB.

kachwanya said...

I think it will be naive to think that the global credit crunch and what we see in the other parts of the world would not affect Kenya..In particular the crisis in the banking sector. . As usual the impact takes time to reach us and believe me once it is here we will be the last to get out it.

Looking at what happened in US in 90's with the introduction of credit have a feeling that if Kenyans are not careful the same thing might just be in the horizon

Village Analyst said...

So far H1 results were much better than H2, it may seem like the downturn's hit our shores harder than the post election thing. - but, the thing is, it usually takes a while for the full impacts of a disruption to be felt.
So we'r back to the pre 2003 situation when banks wouldn't lend coz there'r much higher returns on treasuries especially when the risk element is considered.
...boy are we in for a rough ride!!!

joe said...

There seems to be a trend of poor 4th quarter returns, even with equity.

In extrapolation, does this mean 1st quarter of 2009 will be worse and so on?

Ivo Serentha and Friends said...

Greetings from Italy,good luck


MainaT said...

Like the look for NIC. I think it'll hold up well for 2009. BBK-loan loss provision was understated and will bite it on the backside in '09.

Anonymous said...

Does anyone have an idea about the real estate siuation in kenya? is there a bubble, is it going to burst? How many new houses are being bought on mortgage, and how many people are defaulting on mortgages; any forclosures in kenya as yet?

Maishinski said...

1. There is no credit crunch in Kenya. Banks are overreacting and this is overreaction to media hype is the risk we face in Kenya.

2. Economic slowdown, inflation & hunger crisis is because of PEV. Like Ostriches we bury our head in the sand - refucing to accept reality.

3. 4 quarter results are caused by the banks themselves! they tightened their policies and slowed down their expansion deliberately to take stock of the situation. Remember that was the time bad news hit the peak!

4. Real estate in Kenya is arbitrarily and speculatively priced. True pricing should be 30-35k per Square metre (plinth area) for a decent maisonette and 28-30k/sqM for apartments. Mombasa road, Langata, South C etc.

Take the prevailing rent and multiply by 10 years to get an estimate of how much the house should truly cost. +-10%.

kenyanreality said...

@ Bankelele - isn't the 'Real estate bubble' bursting already??

A quick check at seems to suggest that prices are coming down.

Anonymous said...

You people are talking about banks as if they are manufacturing companies that produce actual goods. It's funny.

The whole world is beginning to re-evaluate what banking means and what banks actually do or should do and you guys are just brushing all that aside in your evaluation of kenyan banks or of the kenyan banking system.

Good luck to you all, you'll need it pretty soon.

Anonymous said...

Anon 6:01.. Where do manufacturing companies keep their money? How do banks make profits?

You have the concept confused with "Investmenk Banks" who deal in non-existent products.

Kenyan banking system is robust and immune.

coldtusker said...

Kenya's banks may be 'strong' BUT I expect bank profits (as an industry) to slow down in 2009. 1Q 2009 may be decent but 2Q is when the profit growth will skid to a halt.

Outliers like Equity Bank will do better than average (1Q+2Q) BUT I do not know how they will cope with defaults among multiple members of the same 'chama' in late 2009.

BBK has experience in downturns. I expect higher NPLs but their profits should stay steady in spite of additional loan provisions.

On a BALANCE SHEET basis, Kenyan banks are OK.

Real estate is in a relative slump. The houses were over-priced. So the price drops are a GOOD thing. By my estimates, prices need to drop 20% before the market is 'healthy'.

Anonymous said...

Kenyan banks are immune? They used to say that about Citigroup, the largest bank in the world. They also said that about bank of america.

The money you deposit in a bank isn't just sitting there. It's being moved around and re-invested. The problem is, the average investor has no idea where that money is being re-invested.

How much insurance does the GOK offer in case of a bank collapse? and even if they offer it, good luck actually getting it.

Anonymous said...

@ Anon,

Where were those banks operating? Look at it from a "financial system" perspective.

Kenya is immune. Their curent copy/paste policies of freezing finance to businesses is what will make them fail.

Businesses will respond by reducing capacity, slashing jobs and looking for other ways to raise working capital - and then its gonna bounce back to the banks (defaults etc) at the time they are projecting a recovery.

Rather than sitting behind their desks, the bankers need to do a "meet the clients" tour around the country to see what's really on the groud? Are we looking at normal incidences of default and misinterpreting them lazily?


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