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Malcolm X

Saturday 6 August 2011

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


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








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