NCBA Group posted an impressive 14.39% y/y jump in net earnings (PAT) to KES 14.65Bn over the nine months to September 2023. The trailing earnings per share (EPS) momentum similarly improved 173bps to KES 9.48 over the quarter. Profitability growth momentum was however tempered by a faster growth in pre-provision operating expenses (18.95% y/y), relative to the rise in operating incomes (11.65% y/y). The trailing return on Equity (ROE) nevertheless improved 20bps q/q to 18.44% while the trailing return on assets (ROA) rose 10bps q/q to 2.50%.
Strong double-digit growth in customer deposits widened the scope to increase reinvestment returns. Growth in customer deposits accelerated 830bps q/q to 18.6% y/y on account of a fast-growing retail footprint. Organic growth across regional markets helped lift total deposits to KES 548.13Bn. Net loans and advances grew by 16.00% y/y to clock KES 308.70Bn – driven by upscaled inclusion via digital channels. As anticipated, the Group’s net interest margins widened 35bps to 6.09% – driven by a faster (80bps y/y) jump in the yields on interest earning assets (YIEA) relative to the cost of funds (45bps y/y). The upswing in YIEA was driven by a faster rise in reinvestment yields on financial assets relative to average yields on loans and advances over the quarter.
Valuation – The counter is currently trading at a P/E ratio of 4.11x and a P/B ratio of 0.73x. The counter closed yesterday’s trading at KES 39.00 – representing an 18.18% y/y gain. We maintain our 12-month BUY recommendation on the counter with a target price of KES 46.75 representing an upside of 19.87% from yesterday’s closing price.
