KENYA COMMERCIAL BANK POSTS 40% JUMP IN 9 MONTH PROFIT BEFORE TAX

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Today afternoon saw the Kenya Commercial Bank Group (KCB) announce its financial results for the 9 month period ending September 30^th 2011

The announcement came hot on the heels of Equity Bank’s own release yesterday and they  managed to pip Equity by registering a higher Profit Before Tax. 

KCB announced a Profit Before Tax of Kshs. 9.1 Billion, a 39.9% jump. Profit After Tax came in at Kshs. 6.4 Billion, a rise of 43.1%

Speaking during the release of the bank’s half year trading results, KCB Group Chairman Peter W. Muthoka noted the difficult operating environment in which banks were operating in. “Over the past six months, we have witnessed the economy going through turbulent times owing to a series of price shocks on fuel and food that has seen the 12-month overall inflation hit 17.32% by September, 2011. Despite all this, the bank has been able to register impressive results, driven by our Transformation Initiatives and growth in our respective business segments,” said the Chairman.

Efficiency, measured by the Cost:Income ratio improved to 66.1% from 70.3%

Subsidiaries continued their positive contribution to the Group business. They made Kshs. 400 Million more in Profit Before Tax than they made at this time last year, validating the managements decision to use some of the Rights Issue money on giving them much needed boosts

They have recently focused their energies on the property sector

The bank reduced its investment in Securities by 23.7% or Kshs. 12.1 Billion in order to focus on lending activities

KCB’s customer base now stands at 1.8 Million for both retail and corporate segments

Q3 2010 vs. Q3 2011 Analysis

	2010  Kshs.	2011  Kshs.	% CHANGE
TOTAL ASSETS	244.2 BILLION	322.5 BILLION	+32%
NET LOANS AND ADVANCES	137.9   BILLION	193.9 BILLION	+40.6%
CUSTOMER DEPOSITS	193.1 BILLION	252.4 BILLION	+30.7%
LOAN:DEPOSIT RATIO	71.4%	76.82%	+5.4%
TOTAL INTEREST INCOME	17.5 BILLION	19 BILLION	+8.8%
TOTAL INTEREST EXPENSE	2.9 BILLION	2.4 BILLION	-15.7%
NET INTEREST INCOME	14.6 BILLION	16.6 BILLION	+13.6%
TOTAL OPERATING INCOME	21.9 BILLION	26.9 BILLION	+22.8%
TOTAL OPERATING EXPENSE	15.4 BILLION	17.8 BILLION	+15.6%
COST:INCOME RATIO	70.26%	66.12%	-4.1%
PROFIT BEFORE TAX	6.5 BILLION	9.1 BILLION	+39.9%
PROFIT AFTER TAX	4.5 BILLION	6.4 BILLION	+43.1%

KCB ramped up its lending by 40.6% to Kshs. 194 Billion which resulted in its Loan:Deposit ratio rising by 5.4% to 76.8% 

KCB’s Non-Interest Income was buoyed by a 47.9% increase in its Fees and Commissions to Kshs.  6.9 Billion. Fees and Commissions now account for 67.3% of its Total Non-Interest Income

Despite the huge volatility in the Currency Markets, Foreign Exchange trading income was flat at Kshs. 2.2 Billion

A 19.4% rise in staff costs to Kshs. 8.65 Billion did not hamper efficiency, measured by the Cost:Income ratio, which improved to 66.1% from 70.3%

Gross Non-Performing Loans (GNPL) increased by 3.3% but overall, the quality of the loan book (GNPL/Net Loans) improved by 3% to 8.19%

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011          Kshs.	Q3 2011          Kshs.	% CHANGE
TOTAL INTEREST INCOME	6.1 BILLION	7.2 BILLION	+19.1%
TOTAL INTEREST EXPENSE	649.8 MILLION	1.2 BILLION	+78.7%
NET INTEREST INCOME	5.4 BILLION	6.1 BILLION	+12.0%
TOTAL OPERATING INCOME	9 BILLION	10 BILLION	+11.7%
TOTAL OPERATING EXPENSE	5.7 BILLION	6.6 BILLION	+15.9%
COST:INCOME RATIO	63.93%	66.3%	+2.4%
PROFIT BEFORE TAX	3.2 BILLION	3.4 BILLION	+4.3%
PROFIT AFTER TAX	2.3 BILLION	2.4 BILLION	+3.1%

Q3 saw a huge increase in Interest Expenses to Kshs. 1.2 Billion, a 79% increment from Q2

Operating Expenses in the 3^rd Quarter also grew faster than Operating Income resulting in Cost:Income ratio in Q3 settling at 66.33%, 2.4% more than in Q2

The Group still managed to post steady growth with Profit Before Tax and Profit After Tax growing at 4.3% and 3.1% respectively from the previous quarter

Since the last 3 months, the tables have been turned and it is now Equity who trail KCB in Profit Before Tax by a figure of around Kshs. 100 Million. At Half Year, KCB trailed Equity by a similar figure

At 14.95, KCB is now trading at a Forward Price to Earnings ratio of 5.14.

EQUITY BANK 9 MONTH PROFIT AFTER TAX RISES 42% TO 7.3 BILLION

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Equity Bank Group today morning released its financial results for the 9 months period ending September 30^th 2011.

Profit After Tax was up 42.3% to stand at Kshs. 7.3 Billion. The Bank registered a Profit Before Tax of Kshs. 9 Billion, a growth of 39.1%  

For its Half Year Results for 2011, Equity Bank had seen Profit Before Tax and Profit After Tax shoot up 51.8% and 57.4% respectively

The last 3 months have been a difficult operating environment for banks which has been characterized by rising inflation and rate hikes by the Central Bank of Kenya. Many banks also hiked their base lending rate. (See previous article on http://kenyainvesting.blogspot.com/2011/06/likely-impact-of-high-inflation-on.html)

But the period was also characterized by huge volatility of the Kenya Shilling and Equity has seen huge growth in Foreign Exchange Trading Income, with that income segment more than doubling.

Subsidiaries contributed Kshs. 595 Million or 8.15% of Profit After Tax in comparison to the 366 Million loss they had last year

2010 vs. 2011 Analysis

	2010  Kshs.	2011  Kshs.	% CHANGE
TOTAL ASSETS	136.6 BILLION	195.4 BILLION	+43%
NET LOANS AND ADVANCES	70.9   BILLION	109.4   BILLION	+54.2%
CUSTOMER DEPOSITS	97 BILLION	144.5 BILLION	+48.9%
LOAN:DEPOSIT RATIO	73.1%	75.7%	+2.6%
TOTAL INTEREST INCOME	9.9 BILLION	13..56 BILLION	+37.1%
TOTAL INTEREST EXPENSE	1.5 BILLION	2.44 BILLION	+63.3%
NET INTEREST INCOME	8.4 BILLION	11.12 BILLION	+32.5%
TOTAL OPERATING INCOME	16.5 BILLION	20.46 BILLION	+23.9%
TOTAL OPERATING EXPENSE	10 BILLION	11.47 BILLION	+14.2%
COST:INCOME RATIO	60.9%	56.1%	-4.8%
PROFIT BEFORE TAX	6.46 BILLION	9 BILLION	+39.1%
PROFIT AFTER TAX	5.13 BILLION	7.3 BILLION	+42.3%

Gross Non Performing Loans was slightly down 2% to Kshs. 3.5 Billion

Net Non Performing loans however was down 27.3% to Kshs. 1.44 Billion from Kshs. 2 Billion

The Cost: Income ratio was down 4.8% to 56.1%

Foreign Exchange Trading Income trading income surged by 155.8% to Kshs. 1.53 Billion from Kshs. 597 Million

Staff Costs were up 9.2% to Kshs. 4.1 Billion

Total Fees and Commissions registered an increase of 12% Kshs. 5.7 Billion

It will come as no surprise that during the period under review, Interest Expenses rose at a much faster pace than Interest Income

The bank significantly reduced Securities ‘held for dealing purposes’.

Interest from Government Securities increased by 35.24% to Kshs. 1.97 Billion, this constituting 14.5% of Total Interest Income

Interest from Loans and Advances was up 33.5% to Kshs. 11.2 Billion this representing 82.6% of Total Interest Income

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011          Kshs.	Q3 2011          Kshs.	% CHANGE
TOTAL INTEREST INCOME	4.3 BILLION	5.24 BILLION	+21.9%
TOTAL INTEREST EXPENSE	620 MILLION	1.4 BILLION	+124.8%
NET INTEREST INCOME	3.68 BILLION	3.85 BILLION	+4.6%
TOTAL OPERATING INCOME	6.63 BILLION	7.3 BILLION	+10.1%
TOTAL OPERATING EXPENSE	3.67 BILLION	4.15 BILLION	+13.3%
COST:INCOME RATIO	55.27%	56.83%	+1.6%
PROFIT BEFORE TAX	2.97 BILLION	3.15 BILLION	+6.3%
PROFIT AFTER TAX	2.40 BILLION	2.56 BILLION	+6.1%

Interest Expenses more than doubled in the 3^rd Quarter in comparison to the 2^nd Quarter.

Cost:Income ratio was also slightly up 1.6% to 56.83%

Generally, expenses grew at a faster rate than income Q3 vs. Q2 period

The bank still proved resilient in the harsh environment and managed to grow profits in the 3^rd Quarter by 6% more than in the 2^nd Quarter

Earnings Per Share rose to 2.63/=. At the current price of 18.85/=, this represents a Price to Earnings ratio of 7.17.