NSE Market Capitalization declined a further 6.58% in September driven by foreign investor sell-offs despite the peaceful conclusion of the August elections. Other than the elections factors, foreign investors’ exits have contributed to an NSE market decline fuelled by rising yields in developed markets following benchmark rate hikes with the US Fed hiking the benchmark rate by another 75bps in the September meeting.
NSE Market Capitalization retreated 2.55% in August. The pullback was an indicator of increased foreign investors’ sell-offs as the August elections approached. Other than the elections factors, foreign investors’ exits has contributed to an NSE market decline fuelled by rising yields in developed markets following benchmark rate hikes with the US Fed hiking the benchmark rate by 75bps in the July meeting. The indicative indices recorded a mixed performance with the NSE 20 gaining 2.93% while NASI lost 2.55%.
Absa Bank HY’22 PAT and EPS edged up 12.96% and 12.62% to KES 6.29Bn and KES 1.16. The leap was driven by a 17.19% y/y increase in Total operating income to KES 20.91Bn supported by interest income from lending. Customer deposits grew 6.72% y/y to KES 281.67Bn while the loan book grew faster at 19.49% y/y to KES 261.54Bn leading to the loan-to-deposit ratio jumping 993bps to 92.85%. Absa’s exposure to government securities reduced marginally by 0.42% y/y to KES 120.76Bn and 11.68% q/q indicating a strategy to slow down on government papers as the yield curve steepening has exposed most lenders to fair value losses. At the current growth rate, we expect the lender to close FY’22 at a PAT of KES 12.65Bn being a 16.37% y/y growth.
NCBA Group PAT increased by 66.85% y/y to KES 7.77Bn while the EPS grew by a similar margin to KES 4.72, both were above our expectations. Growth was driven by a 20.10% y/y increase in Total operating income to KES 28.98Bn and a 6.12% y/y reduction in loan loss provisioning. Net-interest income grew at 10.23% y/y to KES 14.18Bn mainly driven by income from government papers as income from loans declined. Non-funded income grew 32.49% y/y to KES 14.18Bn on the back of increased digital transactions and a 121.94% y/y leap in income from forex trading to KES 5.29Bn. Subsequently, the revenue mix for NII:NFI shifted to 51:49 against the 56:44 recorded in HY’21, being one of the best balance in the banking industry. Effects of the lender’s exposure to government securities was reflected in a fair value loss of KES 1.92Bn which is 2.26% of the for-sale government securities.
DTB Kenya HY’22 EPS and PAT edged up 22.30% to KES 12.82 and KES 3.58Bn, respectively. Net earnings increase was driven by a 14.45% y/y jump in Total operating income to KES 15.05Bn supported by non-interest income and income from Government securities. Customer deposits grew 10.42% to KES 346.49Bn while the loan book grew faster at 14.34% to KES 233.62Bn, taking the loan-to-deposit ratio up 231bps to 67.42%. As we have observed in other listed banking sector HY’22 earnings releases, the effect of the rising yield curve on the mark-to-market for-sale government securities has contributed to fair value losses for most lenders. DTB-K’s FV loss compared to the FVOCI assets was at -2.01% compared to a gain in HY’22.
KCB Group HY’22 PAT, and EPS edged up 27.59% and 27.63%, respectively with both being above our expectations . PAT increase to KES 34.17Bn driven by a double boost of a 16.79% y/y increase in Total Operating income to KES 59.81Bn and a 34.40% y/y decline in Loan Loss Provisions to KES 4.32Bn. Customer deposits grew 15.59% to KES 908.57Bn driven by term deposits while the loan book increased by 20.33% to KES 730.34Bn, taking the loan-to-deposit ratio 316bps higher to 80.38%. Loan book growth was driven by a 23.00% increase in Mobile loans such as Vooma (+34%), Fuliza (+31%), and KCB M-pesa (+2%) to KES 91.00Bn. Factoring in the completion of the TMB acquisition, we expect the lender to close FY’22 with an asset size of KES 1.50Tn.
