COOP Group posted a 7.59% y/y climb in net earnings (PAT) to KES 18.39Bn by close of Q3’23. The Group’s earnings per share (EPS), on the other hand, rose 8.25% y/y to KES 3.15. Performance was supported by a moderate 2.46% y/y growth in net interest income and a 2.05% y/y increase in non-interest income. Trailing ROaE marginally declined 14bps y/y to 22.33% while trailing ROaA marginally increased y/y to 3.64% in Q3’23. The net profit margin accelerated 169bps y/y to 34.44%.
Loan Book growth of 12.80% y/y to KES 378.08Bn paced faster than the 0.19% y/y growth in Customer Deposits to KES 432.83Bn – This led to to a 976bps growth in loan-deposit ratio to 87.35% from 77.58% in Q3’22. On a q/q basis, we observed the 6.69% decline in customer deposits – which we attribute to increased sector-wide competition for sticky deposits and rising discretionary spending needs among depositors. We observed a growth in the balance sheet by 6.31% y/y to KES 661.341Bn – supported by leveraged loan-book growth. Asset allocation to government securities decreased by 130bps y/y to 28% driven by faster loan growth and bond maturities. Fair value losses from government securities decreased by 10.6% to KES 9.00Bn.
Valuation – The counter is currently trading at a P/B ratio of 0.61x and a P/E ratio of 2.84x. The counter closed yesterday’s trading at KES 11.25 - representing a YTD loss of 8.54%. We maintain our BUY Recommendation on the counter with a target price of KES 14.39 representing an upside of 27.91% from yesterdays closing price.
