SCBK posted a 11.77% y/y climb in after-tax profits (PAT) to KES 9.74Bn in the nine months to September 2023. The trailing earnings per share (TEPS) momentum however eased 350bps to KES 34.71 over the quarter. Performance in the quarter was supported by a faster rise in funded income (34.5% y/y) relative to growth in operating expenses (28.41% y/y). The trailing Returns on Equity (ROE) climbed 183bps y/y to 22.65% while the trailing retiurns on assets (ROA) rose 28bps y/y to 3.56%.
Holdings of government securities plunged 50.32% to KES 55.63Bn while loan book growth slowed 3.96% y/y to KES 143.6Bn. This led to a 1500bps y/y decline in asset allocation to government securities to 15% - lowest since 2011. From our vantage point, Standard Chartered Bank Kenya is pruning away its low-yielding financial securities book – retaining only higher yielding assets. This has resulted in an effective widening of net interest margins by 525bps – propelled by upward loan repricing and higher reinvestment returns. The bank posted fair value gains in their government holdings KES 12.37Mn – implying a lean yet resilient financial securities book.
Valuation – The counter is currently trading at a P/B ratio of 0.99x and a P/E ratio of 4.56x. The counter closed yesterday’s trading at KES 156.50 - representing a YTD gain of 9.60%. We maintain our BUY Recommendation on the counter with a target price of KES 169.8.60 representing an upside of 6.64% from yesterday’s closing price.
