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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