Monday, March 02, 2009

KCB Dodges Triton Bullet?

Kenya Commercial Bank released their 2008 financial results over the weekend.

No. 1 but… KCB is now Kenya’s largest bank by bank assets and group assets, though Barclays still has a much larger book of loans and deposits, as well as higher profits.

Also with less than half the assets, Equity may be more profitable than KCB by 2010 if its exponential growth continues.

KCB assets were up 56% and profits 40%, with deposits up 28% and loans up 40% compared to 2007. 2008 was a balanced year for the bank actually performed quite well in Q4.

IPO Killer KCB has effectively delivered the final nail in the coffin of the Kenya Pipeline IPO by suing the corporation for almost $14 million of missing oil. The bank is also leading the case against Triton.

KCB beats expectations A January 2009 analysis by African Alliance pegged a Kshs. 2 billion hit to KCB profit and a pre-tax profit for the bank of Kshs. 2.2 billion - yet KCB managed to report a pre-tax profit of Kshs. 5.3 billion. AA also had an overweight recommendation with a price target of Kshs. 28.85 (at the time KCB was 21) and it looks very attractive at Kshs. 15.5 today.

Q4 watch In the September to December 2008 period deposits were up by 9% and loans by 4% - compared to Q1 loans which were up 4% and deposits 17%. KCB also built up quite a huge cash position with 39 billion (~$500 million) in bank placements at the end of the year.

2009 watch This year the bank has announced, a surprising decision to extend real estate finance to estate developers t the tune of Kshs 250 million (~$3.1 million each) and is also one of the few banks to continue offering personal loans in a very public way with media advertisements

More Nairobist analysis on KCB and KCB and Triton


Fintrade Capital said...

The oil scandal pitting the bank, and KPC nearly dented the banks image and many customer were nearly pulling off to other banks. However news of their profitability serves to lend more credence to the bank's stability and gives hope and a sense of assurrance to its larger customer base.
Going forward and with an overweight valuation, cheap stock, better dividends and added branch networks investors might be waiting a little while for the market to stabilize before taking positions.
The expansion path will be treaded with caution given the financial contagion and the unprecedented world economic crunch. Focus shall therefore be majorly in differentiating its product pool alongside launching more customer oriented products.

Finally, thanks for the good work bankelele!!

Village Analyst said...

The Q4 results were really good; quite surprising really... it seemed like the banks were all been posting significantly reduced performance over each subsequent quarter. Equity and KCB seem to have weathered things well; so far at least!
Finally, its time for home-owned guys to take the lead!

PKW said...

I'm impressed.But si most of this is pre-Triton news? I saw the mini-documentary they had at the end of Jan and wondered if that was some reaction to Triton. But still,definitely a buy for now

MainaT said...

KCB is doing ok. Has a long way to go before it can much other banks in terms of returns to capital, cost efficiency, credit approval processes to name but a few. I'd like to see it add some online banking capability.
On the right track though.
PS: Triton provision was I think Ksh1bn.

coldtusker said...

I think they fully provided for Triton. They have to to pass the 'prudence' test considering Triton is essentially bankrupt. The good news for KCB is that Triton may have some recoverable assets (over the next 2-5 years) but KPC will be bailed out by GoK.

Therefore all purposes, most of the provisions will be written back in 2009 or 2010.

MainaT: I think the pre-tax effect was higher. There is the 'debt' + suspended interest.

coldtusker said...

Equity vs KCB... I think EB will start facing higher defaults.

They are aggressively going after guarantors but loanees are finding fewer 'qualified' guarantors.

I like EB's approach but the bad debt policy/provisioning has not been tested. That said, EB is targeting CDS accounts as well as foreign expansion.

KCB needs to do much more to become efficient.

As EB or KCB catching up with Barclays... at least 3 years away.

coldtusker said...

I need to blog on this!!!

BTW, KPC is toast coz apart from the Kes 7bn that is in the public domain & related to Triton... there is Kes 3bn (likely) owed to Kenol.

bankelele said...

Fintrade Capital: That’s true; as MainaT pointed out they just escaped Mugoya and walked into Triton

Village Analyst: their mortgage push is surprising, but they have been doing that for years

PKW: Ok Triton happened in December, but provisions would have been calculated in January and February

MainaT: Their cost ratio and asset returns pale compared to Barclays and equity – and they have nothing online or in phone banking

Coldtusker: I guess GoK have no choice otherwise Pipeline’s legal fees will start piling on to the loss figure
-will see about equity, was reading on stockskenya about guarantor woes at Equity

inspectordanger said...

on a bigger picture, KCB seems to be shinning. But the small investor like me is crying. In fact I am closing my KCB account because of what I feel is unfair treatment. Believe me, more guyz like me will be exiting the bank. Some quick highlights:
I never receive my monthly statement (postal or online)
I signed up for sms banking, I am not receiving that service (I don't get charged either)
I have been with the bank for 6 years now, I apply for a loan and it is rejected twice. The last rejection could have be caught on the first submission, hence I lost two months waiting for KCB rejection.
I am applying the same amount of loan from Stanchart, it will take me less than a month to get the loan. never mind my getting a little personal.


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