Banks Report H1 Results
We dig into the earnings of Equity, KCB, Cooperative and other banks
Welcome to the Baobab Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.
This week, we cover banking in Kenya as three of East Africa’s largest banks by asset size released their half-year ended 30 June 2021 results and take look at the Nairobi Securities Exchange as its market cap hit a historic high on Tuesday.
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Equity posts historic half-year profit growth
Solid balance sheet: Total assets grew 50% to Ksh 1.12 trillion driven by a 51% growth in customer deposits to Ksh 820.3B, which are growing at a higher rate than loans & advances (29%).
“This growth in balance sheet will anchor economic diplomacy across the region ”Equity Group MD & CEO- Dr James Mwangi
PAT almost doubles: Up 98% to Ksh 17.9B as loan loss provisions came down an impressive 64% and net interest income went up 26%.
DRC, the jewel on the crown: The CEO is quite bullish on DRC, painting a positive outlook in Congo for Equity Group Holdings, citing global commodity prices that seem to favor DRC, which has huge copper and cobalt reserves. During the investors’ call, the management team cited the strong policies in the financial and economic sectors as tailwinds.
If there’s one country that this group most likely will be defined by, it is the DRC. Those who call DRC the jewel on the crown, I agree with them”- Equity CEO & MD Dr James Mwangi
Equity BCDC, the subsidiary in Congo, posted impressive growth numbers.
Risk-based lending: During the release of the results, CEO Dr. James Mwangi disclosed that discussions with the Central Bank of Kenya for the lender to switch to risk-based lending were nearing completion.
Other highlights:
Interest income [loans & advances] up 30%
Interest income [govt securities] up 30%
Total non-interest income up 44%
Total operating expenses up 4%
No interim dividend
KCB reaches Ksh 1T balance sheet mark.
Historic milestone: The Group’s balance sheet closed the first half of the year at Ksh 1.02 trillion, a 7% jump from Ksh 953B. The growth was driven by an 8.4% growth in the loan book and a marginal 3.7% growth in customer deposits. Notably, the acquisitions of BancABC of Tanzania and BPR of Rwanda were NOT reflected in this balance sheet.
2x growth in PAT: Profit after tax doubled to Ksh 15.3B from Ksh 7.6B driven by interest income from loans and government securities. Provisions were down an impressive 40.3%.
KCB also eyeing DRC: CEO Joshua Oigara disclosed that the lender was eyeing two institutions in Congo. Equity Bank beat KCB on the entry into DRC with its acquisition of Banque Commerciale Du Congo (BCDC).
Source: Bloomberg
Other highlights:
Interest income [loans & advances] up 15%
Interest income [govt securities] up 11.6%
Total non-interest income up 5.9%
Total operating expenses down 9%
No interim dividend
Co-operative posts marginal profit growth
Provisions eat into profit: A 123% rise in loan loss provisions from Ksh 1.9B to Ksh 4.2B meant profit rose only 2.3% to Ksh 7.4B. This is in contrast to KCB Group and Equity Group Holdings who significantly reduced their provisions.
“The Group prudentially increased loan loss provisions to Sh4.2 billion in appreciation of the challenges that businesses and households continue to face due to the economic effects of the ongoing pandemic” - Co-operative Bank CEO Gideon Muriuki
Kingdom bank recovers: The 90% owned subsidiary improved its profit position from Ksh 200M loss for the full year ended December to Ksh 275M profit as at end of June this year.
Highlights:
Interest income [loans & advances] up 12.7%
Interest income [govt securities] up 42%
Net interest income up 18%
Total non-interest income up 24%
No interim dividend
Please note: Check out our Twitter thread on the results of various other Kenyan banks that reported their H1 earnings this week here.
Historic highs at the NSE
Safaricom and the banks: Tuesday, 17 August 2021 was a historic day at Kenya’s Nairobi Securities Exchange as a rally by Safaricom, Equity Group Holdings, and KCB Group pushed market capitalization to Ksh 2.92 trillion, the highest in the history of the NSE. Safaricom rose to a historic high of Ksh 44.90 since listing in 2008 while Equity and KCB rose to 12 months highs of Ksh 53.5 and Ksh 50.75 respectively.
Mwango Explainer: Market capitalization or “market cap” is the value of a company traded on the stock market. It is calculated by multiplying the number of outstanding shares by the current market price.
Other market indicators that day: The NSE 25 index rose to a 12 month high of 4075 points.
Skewed market? Safaricom, Equity, and KCB now account for 67% of total market capitalization pointing towards dominance by a select few blue-chip stocks that ultimately guides the performance of the market as a whole as opposed to indices.
New listing? The NSE is about to welcome a new listing into the main board in the form of British gold miner, Papilion, that will list in September. This is a positive for the Kenyan exchange that has lacked listings over the years.
Markets this Week
In East Africa, Kenya recorded a 2.84% rise with the Nairobi Securities Exchange All Share Index closing the week at 186.33. Tanzania’s DSE ASI was up 0.22% to close at 2,001.98 while Uganda’s USE ASI recorded a 1.41% rise to close at 1,557.00.
Across Africa, BVRM recorded the highest increase in returns last week, up 3.13% to close at 175.85.
What Else Happened This Week?
Do you love Britannia biscuits? Britannia Foods Ltd has been placed under administration following a default of Ksh 1.3B loans provided by DTB bank and other creditors [Business Daily].
New appointments: Eric Fanchini is the new Managing Director of Total Energies Marketing Kenya. Chike Isiuwe is the new Chief Executive of UBA Bank Kenya.
More half-year results: Total Energies Marketing Kenya, Sanlam Kenya, and Kakuzi released their half-year earnings. Across the region, BAT Uganda also released its half-year earnings, posting a 50% profit decline.
Cytonn v CMA: The latest round this week saw the fund manager petition Kenya’s Parliament to probe the appointment of CMA CEO Wycliffe Shamiah [PD Online].
Debt Market: Kenya’s Treasury floated a Ksh 75B amortized infrastructure bond with a value date of 13th September 2021 [Central Bank of Kenya].