Kenya | NSE

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.

During the month of January, the indicative indices opened the year on a negative with both the NSE-20 and NASI declining 1.12% and 1.22% m/m to close at 1657.22 and 125.91 respectively. Foreign investors remained as net sellers with the selling position increasing by 71.17% to KES 2.86Bn, if the same trend continues the total foreign net selling position for 2023 is likely to surpass the KES 24.04Bn recorded in 2022.

2022 was expected to be the year that economies around the world rebounded especially after Covid 19 ravaged the globe in 2020. However, this was short lived as the world saw in February the onset of the Russian-Ukrainian war. The announcement of the war triggered a panic sell-off of stocks by foreign investors to seek shelter in government securities or fixed income in developed nations in what is termed as flight-to-safety. The uncertainty surrounding the Kenyan election, soaring drought and the jump in interest rates in developed markets all contributed to the 61.75% foreign sales seen in the market during the year.