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

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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