Diamond Trust Bank Group posted a modest 5.00% y/y climb in profit after tax (PAT) to KES 6.61Bn over the nine months to September 2023. The trailing EPS momentum however eased 262bps to KES 22.56 over the same period. The rise in PAT was supported by a faster surge in non-funded income (33.92% y/y) compared to funded income (19.57% y/y). The trailing returns on equity (ROE) climbed 197bps y/y to 10.02% while the trailing returns on assets (ROA) climbed 11bps y/y to 1.29%. The group’s net interest margin (NIM) widened marginally to 5.20% even as the profitability margin edged down 403bps y/y to 22.57%.
Customer deposits grew 27.26% y/y to KES 457.74Bn – faster than the 18.66% y/y loan book growth to KES 289.14Bn leading to a 458bps y/y decrease in the loan deposit ratio to 63.17% from 67.74% recorded in Q3’22. On a q/q basis allocation to government securities edged down by 2.30% to KES 206.72Bn while there was a contrary 53.40% q/q rise in income from government securities to KES 17.62Bn suggesting restructuring of bond portfolio to eliminate lower-yielding securities. The lender’s operating expenses (excluding provisions) increased by 36.89% y/y to KES 14.66Bn from KES 10.71Bn. We attribute this to rising capital expenditure requirements to fund the ongoing branch expansion drive.
Valuation – DTB-K is currently trading at a P/B multiple of 0.18x and a P/E of 1.40x. The counter closed yesterday’s trading at KES 45.05 - representing a YTD loss of 9.90%. We expect the modest growth trajectory to sustain over the remaining quarter. As such, we maintain our 12-month BUY recommendation on the counter supported by a correction of the heavy market discounting relative to book value.
