ABSA Group released their Q3’23 net earnings results posting a 14.86% and climb in PAT to KES 12.31Bn. The trailing EPS however eased 250bps to KES 2.98 per share over the quarter. Performance was driven by a 25.99% surge in net interest income and a 6.41% increase in non-interest income. Trailing ROaE and ROaA improved to 25.77% and 3.28% respectively in Q3’23. The group’s net interest margin (NIM) trimmed 11bps q/q to 8.40% while profit margin edged down by 29bps to 30.71%.
Customer deposits grew 26.06% y/y to KES 353.31Bn faster than the 14.33% y/y growth in the loan book to KES 330.93Bn leading to a 958bps y/y decrease in the loan deposit ratio to 93.40% from 102.98% recorded in Q3’22. Similarly on a q/q basis, we observed 2.44% faster growth in customer deposits compared to loan book expansion - attributable in part, to enhanced efficiency in deposit mobilization. Despite the 23.76% y/y decline in the stock of government securities, we noted a counterintuitive 66bps y/y rise in income from government securities – implying bond portfolio restructuring to prune away lower-yielding securities.
Valuation – ABSA is currently trading at P/B multiple of 0.96x with a P/E 4.10x. The counter closed the last trading session at KES 11.60 being a YTD decline of 5.69%. We maintain our BUY recommendation on the counter with a target price of KES 14.72 representing a 26.90% upside from the last trading session’s closing price.
