I&M Holdings recorded a remarkable 14.29% y/y rise in after-tax profits (PAT) to KES 8.20Bn over the nine months to September 2023. The trailing earnings per share (EPS) momentum similarly accelerated 767bps to KES 7.35 over the quarter. Profitability growth momentum was however dampened by a faster growth in pre-provision operating expenses (28.73% y/y), relative to the rise in operating incomes (19.37% y/y). The trailing return on Equity (ROE) nevertheless improved 90bps q/q to 16.50% while the trailing return on assets (ROA) rose 10bps q/q to 2.50%.
Aggressive deposit mobilization efforts meet by a rising rate landscape. Group customer deposits surged 30.6% y/y owing to aggressive deposit mobilization in the period. Organic growth across regional markets helped lift total deposits to KES 402.41Bn. Growth in net loans and advances similarly advanced 26.9% y/y to clock KES 308.70Bn – driven by organic demand growth and upward rate repricing under the risk-based credit pricing regime. A faster surge in overall cost of funds (52bps y/y) relative to the yields on interest earning assets (YIEA) (-1bps y/y), led to a compression of net-interest margins to 6.15%. The upswing in cost of funds was driven by intense sector-wide competition for sticky deposits – leading the lender to accede to dearer deposits.
Valuation – The counter is currently trading at a P/E ratio of 2.38x and a P/B ratio of 0.37x. The counter closed yesterday’s trading at KES 17.50 – representing an 2.94% y/y gain. We maintain our 12-month BUY recommendation on the counter with a target price of KES 20.85 representing an upside of 19.14% from yesterday’s closing price.
