Kenya | NSE

KCB Group released their FY’22 earnings results posting a 19.78% & 19.13% climb in EPS & PAT respectively to KES 12.71/share and KES 40.61Bn respectively driven by a 11.53% increase in net interest income and a 39.79% growth in non-interest income. Trailing ROaE & ROaA improved to 25.54% & 3.53% respectively in FY’22. NIMs remained adequate at 7.46% while the profit margin edged down 2bps y/y to 31.44%. In line with our expectation, the board of directors recommended a final dividend of KES 1.00 taking the total dividend paid out in FY’22 to KES 2.00 representing a 33.33% decline from KES 3.00 paid out in FY’21.

ABSA Group released their FY’22 earnings results posting a 34.28% & 34.20% climb in EPS & PAT respectively to KES 2.69/share and KES 14.59Bn respectively driven by a 27.91% increase in net interest income and a 17.24% growth in non-interest income. Trailing ROaE & ROaA improved to 24.30% & 3.22% respectively in FY’22. NIMs remained adequate at 7.69% while the profit margin edged up 228bps y/y to 31.72%. In line with our expectation, the board of directors recommended a final dividend of KES 1.15 (Our estimates were KES 1.20) taking the total dividend paid out in FY’22 to KES 1.35 representing a 22.73% increase from KES 1.10 paid out in FY’21. The book closure of the dividends is set for 28th April 2023 while payment is expected to be made on 25th May 2023.

Standard Chartered Bank Kenya FY’22 earnings results were higher than our expectations. The lender posted a 33.41% y/y climb in PAT and a 33.97% growth in EPS to KES 12.06Bn and KES 31.47/share, respectively, driven by a 18.13% y/y growth in net interest income and a 13.53% y/y growth in non-interest income. Trailing ROaE & ROaA improved to 22.05% & 3.37% respectively in FY’22 as NIMs remained adequate at 6.96%. The board of directors recommended a final dividend of KES 16.00 taking the total dividend paid out in FY’22 to KES 22.00 representing a 15.79% increase from KES 19.00 paid out in FY’21.

Local Pump Prices Remained Constant - EPRA maintained the fuel prices constant for the next month despite a 2.81% decline in the landing cost of murban crude at 90.90 USD from 93.53 USD recorded in December. We also noted a continued difference in the USD exchange rate from CBK’s official quoted currency with the exchange rate coming in at KES 130.64//USD compared to the average CBK rate of KES 123.92/USD in January. Petrol will continue retailing at KES 177.30/litre, diesel at KES 162.00/litre and kerosene will continue at KES 145.94. Additionally, the price of diesel was cross-subsidized with that of petrol while the government maintained a KES 19.41/litre subsidy on Kerosene.

Stanbic Holdings PLC FY’22 earnings results were higher than our expectations. The lender posted a 25.69% y/y climb in PAT and a 25.70% growth in EPS to KES 9.06Bn and KES 22.92/share respectively driven by a 31.81% y/y growth in net interest income and a 23.74% y/y growth in non-interest income. Trailing ROaE & ROaA improved to 15.66% & 2.84% respectively in FY’22 as NIMs remained adequate at 5.89. The board of directors recommended a KES 12.60 Dividend, which was higher than our KES 9-11.00 expectations, and 40.00% higher than the KE 9.00 in FY’21. Customer deposits grew 19.53% y/y to KES 304.32Bn faster than the 16.36% y/y growth in the Loan book to KES 266.83Bn leading to a 239bps decline in the loan deposit ratio to 87.86%. We observed a notable jump in lending to sectors such as infrastructure (KES 15.00Bn vs KES 3.90Bn in FY’21), SME lending ( KES 33.00Bn vs 24.00Bn in FY’21) and Affordable housing (KES 267Mn). Digital lending platform (M-jeki) disbursed a monthly average KES 3.06Bn higher than the FY’21 average of KES 2.30Bn highlighting the growth potential in the digital lending business. Allocation to investment securities grew 40.34% y/y to 83.55Bn in FY’22 driven by hunt for higher yields. Fair Value changes through OCI recorded a 5.71x decline y/y to 58.20Mn.

Historically, the banking sector’s performance has always had a driving force behind it. FY’20 - Reduced profits were driven by increased impairment provisioning following the pandemic-induced lending risk increase. FY’21- Reversal of impairment provisioning saw banks increase their profits. FY’22 – We expect the PAT to be driven by increased foreign exchange income following arbitrage opportunities created by the dollar shortage. FY’23 –We expect banking sector earnings to be driven by a combination of a return to lending following the approval of Risk-based Models, fees from lending, and foreign exchange trading income.