Kenya | NSE

Equity Group HY’22 net earnings edged up 35.32% y/y to KES 24.43Bn while EPS also jumped 35.27% to KES 6.29. The impressive growth in bottom-line was mainly driven by a 26.44% growth in operating income to KES 65.65Bn weighed down by a 23.64% y/y growth in Total Operating Expenses to KES 34.73Bn and a 28.00% contribution from subsidiaries. Customer deposits grew 18.45% y/y to KES 970.94Bn while the loan book increased faster at 28.86% y/y to KES 650.56Bn, taking the loan to deposit ratio 541bps higher to 67.00%. Loan book growth was driven by highest increase in lending from DRC, Uganda and Rwandan markets while deposits mobilization through digital channels was highest in DRC, Kenya and Uganda. At the current growth rate, we expect the lender to close FY’22 at a PAT of KES 49.33Bn being a 23.11% y/y growth.

Stanbic Holdings HY’22 EPS edged up 36.91% to KES 12.13 higher than our expectations of KES 11.80. Additionally, PAT edged up 36.95% y/y to KES 4.80Bn driven by a 16.07% y/y decrease in Loan impairment provisioning and a 22.77% increase in Total Operating Income. Customer deposits reduced 0.68% to KES 258.23Bn while the loan book grew 17.54% to KES 244.04Bn, taking the loan to deposits ratio 14.26% points higher to 94.50%. Stanbic bank’s exposure to government securities reduced 36.16% y/y to KES 52.49Bn and 11.97% 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 8.90Bn being a 23.61% y/y growth.

I & M Holdings HY’22 EPS increased 15.98% y/y, on an adjusted basis following the bonus issue in 2021, to KES 2.83 higher than our expectations. PAT increased 15.91% y/y to KES 4.93Bn driven by a 21.62% y/y increase in Total operating income to KES 15.58Bn supported by income from government papers. However, the gain in income was weighed down by a 19.27% y/y rise in Operating expenses to KES 8.60Bn on the back of increased provisioning. Customer deposits grew 13.16% to KES 313.18Bn while the loan book grew 13.02% to KES 231.07Bn leading to a flat Loan to deposit ratio at 73.78%. We continue to see the effect of the yield curve steepening as the fair value loss from government securities, at KES 5.56Bn, compared to the FVOCI securities jumped to 10.16% higher than 0.33% in HY’21. At the current growth rate, we expect the lender to close FY’22 at a PAT of KES 10.19Bn being a 25.35% y/y growth.

SCBK HY’22 net earnings edged up 10.89% to KES 5.41Bn which was marginally above our expectations of KES 5.32Bn, while the EPS also grew 9.30% to KES 13.87. The impressive numbers, in the bottom line, were mainly powered by growth in operating income (+10.23% y/y to KES 15.56Bn) despite a concurrent growth in Total Operating Expenses (+9.18% y/y to KES 7.99Bn). Balance sheet expansion remained muted with the loan book (-1.35% y/y to KES 128.52Bn) declining compared to growth in customer deposits (+3.14% y/y to KES 286.91Bn).

NSE Market Capitalization increased 13.36% in July . The increase was an indicator of a better market performance despite foreign investors remining as net sellers as the flight to safety continues. Foreign exits have been 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 NSE 20 and the NASI recorded upward m/m trends of 5.48% and 13.29%.

On 2nd August 2022, KCB Group announced the proposed acquisition of an 85.00% shareholding in the Trust Merchant Bank SA of DR Congo, with an option for a full takeover in two years. Subject to regulatory and shareholders’ approval, the completion of the transaction will see KCB acquire control of TMB and open doors for an entry into the much-coveted DRC market. Assuming a similar timeline to the Equity Group’s acquisition of BCDC Bank in 2020, we expect the transaction to be completed in Q1’23.