Friday, February 13, 2009

Equity leads the Kenyan Economy

The first Bank (as usual) out with the 2008 profits is Equity Bank with the usual staggering financial results (PDF) for 2008 with 101% growth in profits and 103% in loans.

But a closer look at the numbers show some more subdued stats that may indicate an economic slowdown, and which may be confirmed when other banks (especially Barclays and KCB) release their year-end results in the next two months.

- Equity’s growth in assets is 45% from a year ago, but 6% in Q3 and 3% in Q4
- Equity’s deposits are 55% up from a year ago, but this breaks down to 23% in Q2, 10% in Q3 and 6% in Q4
- Equity’s’ loans are up 87%, but the 41% increase in Q2, was followed by 17% in Q3 and 2% in Q4
- Expansion costs - income up 98% from a year ago, but expenses have kept track – up 97% from a year ago (in 2007, the spread was 73% and 52% in 06/07)
- Factor in Safaricom IPO lending (interest and fees) estimated at– and Q2 income was 3x higher than in any of the other two quarters
- Cross-checking against the 2007 election and disruption in economic activity, in 4Q of 2007, Equity had growth of 18% in deposits and 33% in loans with 54% in profits in same quarter, with in 1Q of 2008, had 8% deposit and 11% in loans, rates which outpace 4Q of 2008

Shareholders will be happy with the Kshs. 3/= dividend, but the 1 for 10 share split, will add a huge float of shares to an overflowing NSE pool.

Bank opportunities
most from the daily papers this week
- African Development Bank is currently accepting applications for its Young Professionals Program . Apply online by 20/2
- Barclays seeking debt recovery agents – auctioneers, re-possessors, valuers and investigators. D/L is 28/2
- Commercial Bank of Africa: senior manager finance. Apply through KPMG by 25/2
- Family Bank Bancassurance Manager. D/L for online applicatiosn is 6/3
- IFC Investment officer (private equity & investment funds division) Africa, based in Nairobi. D/L is 27/2


Fintrade Capital said...

The rather impressive results by Equity is welcome but might not stir the market after all. Flooding the market with the 1:10 split shares will not help the share price despite dividend issuance. Upcoming banks results might not be that sterling after all what with global economic turmoil raging ferociously and many giants tumbling.

Village Analyst said...

I happen to think that increased liquidity is important for the development of the NSE. I happen to be of the opinion that there should actually be lower limits placed on the number of shares issued for the various sectors; its of little use to have a high number of listed co's on the main market that are not liquid.
I hope that the sour safcom experience is not the basis for stock split (increased liquidity) negativity.

MainaT said...

The matatu syndrome now infects Equity. I think its probably the conflict of interest that is at play. Somebody told me Equity is one if not the largest custodians at the NSE. Hence, its in its interest to bring some excitement into the market.
Most Equity shareholders (not the principals), that I've met only hold the share for capital gains only. The DPS was for Helios sake.

Maishinski said...

Equity is a wakeup call for those who thought Financial crisis affected Kenya.

I think their nationwide reach is widespread enough such that their financial performance to be a representative sample of overall financial well being of regular Kenyans.

The problems Kenyans are facing (food shortage / inflation) are related to the shameful acts in Jan 2008 and Corrupt Leaders (look at all the scandals).

Nothing to do with Global Economy!!!! We need to see a spade for what it really is.

NSE may have been affected when foreigners pulled out - but already the stocks were overpriced at the time (a correction was imminent!).

What we see now at NSE is a stock market that more closely reflects the situation on the ground. Hence rather than the prices being Bargains - these are the normal prices that should have been there all along.

BAMM!! There, I said it. Hard to believe but that's, more likely than not, the reality on the ground.

Mashatall said...

Look closely at the jump in non-performing loans(Kshs.2.7B) and that will give you indications of where the economy is headed, with most clients defaulting on un-secured loans Equity needs to reassess its loan portfolio. Barclays just advertised for debt collectors so am not really bullish on financial stocks, and especially banks that are still aggressively advancing aginst the backdrop of a tightening global credit market. Prudent and conservative banks like stanchart and CFC stanbic look like safer bets long term to me, numbers never lie!

Maishinski said...

MBA basics: Know your market. Know your customer.

Equity knows it can be bullish with middle-lower income kenyans since they are not really affected by the global economy.

Stanchart & CFC are more risky because they rely on policies set by their head offices in countries with totally different conditions.

Provision for bad debts does not mean the default rate is high. They are just being prudent - given the current fears about credit issues.

Provided they are not cooking the books, Equity is signalling a turning point for the economy. Perhaps it's time to take positions?

I boldly predict the Kenyan Economy will be back on a growth track within 6 months. Whether there's a global recession or not.

Anonymous said...

Employment: 80% increase

Liquidity Ratio (more important than assets): up 50%

Customer numbers: Up by 79%. More people need accounts - hence more people have jobs/income sources?

Something good is happening in the economy...

Anonymous said...

BBK posts 8billion PBT for 2008. Despite all the gloomy forecasts!

Something positive is happening in Kenya!


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