November Review

During the month, listed commercial banks released their 3Q22 financial results. The results signalled recovery in the banking sector as the lender’s asset quality improved albeit still a concern with the Cost to Income Ratio Less provisioning well above the 40% mark for majority of the banks . Most Lenders recorded a significant increase in Non-Funded Income compared to Net Interest Income mainly driven by increased income from fees and commissions on loans and advances. The ongoing dollar shortage on the forex market created market inefficiencies for the lenders, as seen by the significant growth of forex trading income. Despite the stellar performance recorded during the quarter, only two banks declared an interim dividend, KCB & SCBK.

Safaricom, KenGen and Centum also released their financial results. Safaricom’s HY23 net earnings increased 4.82% y/y to 153.45 Bn which included KES 98.30 Mn in revenue from its Ethiopian subsidiary. KenGen’s FY21 net earnings increasing by 157.87% y/y to KES 4.72Bn due to additional income from drilling projects in Ethiopia and Djibouti. KenGen announced a final dividend of KES 0.20, 33.33% lower than KES 0.30 announced a year earlier. Centum HY22 net loss increased by 94.94% y/y to (KES 1.29Bn) attributable to the 88.98% y/y increase in loss from Real Estate Operations. The company announced a proposed share buy back plan of 10% of the issued shares via on market purchases although pending regulatory approval.

The headline inflation declined after eight straight months of continuous increase to 9.50% in November from 9.59% recorded in October. The CPI declined 0.43% to 127.31 in November 2022 from 127.86 in October 2022. Meanwhile, the food and non-alcoholic beverages index increased by 15.40% y/y was slower than in October. We expect headline inflation to remain under pressure and above the CBK’s upper target in December.

The MPC met on the 23rd November 2022 against the backdrop of The COVID-19 pandemic, elevated global inflationary pressures, heightened geopolitical tensions, elevated commodity prices, and actions taken by governments around the world in response to these developments. The MPC examined the results of its earlier decisions as well as the steps taken to lessen their negative economic effects and financial disruptions that led to 50bps raise in the Central Bank Rate (CBR) from 8.25% to 8.75%.

Kenya shilling continued to depreciate against the USD, losing 0.92% on a m/m basis to close at a historical high of KES 122.45. On a YTD basis, the shilling has depreciated 8.30% against the USD 8.85% y/y, and 11.22% from the same period in 2020. This is mainly attributable to; the strengthening of the dollar, increased dollar demand from energy importers following high global oil prices, and depressed earnings from agriculture and horticulture.