Q3 2022 Kenyan Banks’ Earnings
KCB and Coop assets up 13.7% and 4.9% respectively
👋 Welcome to The Mwango 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 Q3 2022 Kenyan banks’ earnings, TransCentury's rights issue, and the Hustler Fund that is nearing launch.First off, enjoy our weekly business news in memes brought to you by the Jubilee Live Free Race:
KCB Q3 2022 Results
Assets Up 13.7%: In the nine months to September 2022, KCB Group reported an asset base of KES 1.27T, a 13.7% increase year-over-year. The loan book grew 16% to KES 758.8B, accounting for 59.5% of the balance sheet, while holdings of government securities rose 6.9% to KES 269.9B to represent 21.1% of the asset base.
Revenue Mix: Operating income was up 15.3% to KES 92.1B. Net interest income was up 9.1% to KES 61.6B, contributing 66.8% of total operating income, while non-interest income was up 30.2% to KES 30.6B, contributing 33.2% of total operating income. Profit Before Tax grew 20.9% to KES 43.3B bringing the net profit for the year to KES 30.6B, a 21.4% increase. Earnings Per Share were up 21.3% to KES 12.7. The bank announced an interim dividend of KES 1 per share, a Dividend Payout Ratio of 7.9%.
“Reflecting on the nine months, we have had a good run, and the business remains resilient and well within the target on Group for the 3 quarters. This is thanks to the perseverance of our staff and the support of our customers and other stakeholders.”
KCB Group Chairman Andrew Wambari Kairu
Asset Quality: Gross Non-Performing Loans (NPLs) and net NPLs were up 52.1% and 96.1% to KES 149.3B and KES 70B, respectively. Loan loss provisions through the Income Statement fell 22% to KES 7.3B, while on its balance sheet, statutory loan reserves were up 6.3X to KES 28.1B.
Coop Q3 2022 Results
Asset Allocation: Total assets rose 4.9% year-over-year to KES 622.1B. The loan book accounted for 53.9% of the balance sheet while holdings of government securities constituted 29.6% of the balance sheet, compared to 51.7% and 32.8% in 2021, respectively.
Loan Book Grows 9%: Loans and advances grew 9.4% to reach KES 335.2B, recording the highest growth in Q3 since the 14.2% increase in 2017.
Non-Interest Income Up 28%: Net Interest Income grew 11.7% to KES 32B. In contrast, Non-Interest Income grew 28.3%, or 2.4X the pace of Net Interest Income growth, to reach KES 20.2B. This brings the contribution ratio to operating income to 61:39 [Q3 2021: 65:35].
Bottom Line: Total operating income grew 17.6% to KES 52.2B. Loan loss provisions through the income statement fell 5.2% to KES 5.7B while perating expenses were up 5.9% to KES 29.6B, accounting for 56.8% of total operating income. Profit Before Tax was up 38.2% to KES 22.7B with the net profit for the year up 47% to KES 17.1B.
More Earnings
Centum RE Narrows Loss: Net revenue from the sale of residential units declined 3.6% year-over-year to KES 898M for the 6-month period ended September 30, 2022. Gross profit stood at KES 178.6M, a 31.8% increase, bringing the gross margin to 19.9% [2021: 14.5%]. Operating and administrative expenses were up 18.6% to KES 276.5M, resulting in an operating loss of KES 2.4M [2021: KES 70.1M]. The firm reduced its loss for the year by 38.1% to KES 187.4M.
Kapchorua Net Income Up 4.5X: In H1 2023, turnover grew 18.9% year-over-year to reach KES 777.4M. Profit Before Tax was up a whopping 352.8% to KES 165.9M, bringing Net Income to KES 116.2M, a 352.6% increase. The firm attributed the improved performance in the period to the increased demand for its teas coupled with the weakening shilling.
Williamson Tea Rebounds to Profit: Revenue edged up 45.3% year-over-year to reach KES 1.9B in H1 2023, bringing Profit Before Taxes to KES 371.8M [2021: KES 3.3M loss]. The firm reported a Net Profit of KES 246.9M [2021: KES 7.8M loss].
TransCentury Rights Issue
Scoop: The Capital Markets Authority has approved TransCentury Plc to undertake a rights issue targeting to raise KES 2.063B by issuing and listing 1.88B new ordinary shares at KES 1.10 per share. The rights will be issued at 5 new ordinary shares for every 1 existing share held by each shareholder. As of market close last week, TransCentury had 375.2M outstanding shares listed at the Nairobi Securities Exchange (NSE) and was down 10.8% year-to-date.
Capital Deployment: According to the CMA, the proceeds of the rights issue will be applied towards settling debts and unlocking additional working capital financing for the Group. The company is also set to use part of the funds to undertake audits and publish its financial statements for the year ended December 31 2021 which were due 30 April 2022.
"The Authority's approval of the rights issue was contingent on TransCentury Plc meeting several conditions among them, publication of financial statements for the year ended 31 December 2020 as well as availing for inspection by shareholders Management Accounts for the year ended 31 December 2021. We are satisfied that the disclosures made in the issuer's information memorandum comply with the requirements of Regulation 11 of the Capital Markets (Securities)(Public Offers, Listing and Disclosures) (Regulations) 2002, and contain the information that will enable investors to make an informed decision on the rights issue."
CMA Chief Executive Officer Wyckliffe Shamiah
A minimum of 50% of the rights are required to be accepted for the rights issue to be declared successful. Over the last 5 years, TransCentury has reported a KES 16.7B combined loss.
Exit Mudiwa, Enter Oigara
Mudiwa Exits After 5 Years: Stanbic Bank Kenya and South Sudan Chief Executive Officer (CEO) Charles Mudiwa is set to retire from the helm of the bank effective December 31, 2022. He has been the CEO since 2017 and has served Africa’s largest bank by assets - Standard Bank, in various capacities since 2002.
“I am indeed humbled to have served at Standard Bank Group over the last 20 years, playing a pivotal role as a change agent. I am confident that the group will continue to scale new heights, guided by its purposeful strategy to drive Africa’s growth while uplifting her people and ensure that all of the business activities deliver net-positive social, economic and environmental impacts for the economies and communities in which they operate.”
Stanbic Bank Kenya and South Sudan CEO, Charles Mudiwa
Enter Oigara: Joshua Oigara, the immediate former CEO of Kenya’s second-largest bank by assets KCB Group, has been appointed CEO for Stanbic Bank Kenya and South Sudan effective December 1, 2022.
Hustler Fund Nears Launch
November 30 Launch Date: According to the Cabinet Secretary for Co-operatives & Micro, Small and Medium Enterprises Simon Chelugui, on November 30, the President will launch the Hustler Fund's Personal Finance product, with the remaining Micro, SMEs, and Start-Ups Loans products to be launched at later dates. The government has also outlined the Personal Loan product will be between KES 500 - KES 50K repayable in 14 days at 8% interest calculated pro-rata daily.
Disbursement and Interest: The government is working with Mobile Network Operators (MNOs) including Safaricom, Airtel and Telkom on the disbursement of funds. For every borrowing via the Fund, 5% of the amount goes to an interest-bearing saving scheme, and in furtherance of the savings agenda, the government will add KES 1 for every KES 2 saved via the Fund.
“The product is going to be seamless. You will not need any paperwork. You will not need any committee. The product will be online just like M-PESA. We are working with our MNOs and technology providers and all the mobile operators including Safaricom, Airtel, Telkom and all the others are on board and that is the platform on which the money is going to be disbursed.”
President of Kenya, William Samoei Ruto.
Debt Markets
T-bills: In the short-term debt markets, yields on the 91 Days, 182 Days and 364 Days Treasury Bills were 9.191%, 9.721% and 10.181%, respectively, down by a collective 6.2 basis points (bps) from the previous auction. The acceptance rate stood at 304.6%, 132.2%, and 46.7%, respectively, bringing the overall acceptance rate for the market operation to 125.4%.
Infrastructure Bond Tap Sale: The Central Bank of Kenya (CBK) last week announced a tap sale for the infrastructure bond IFB1/2021/14, with the period of sale running from November 16 to November 2022 with KES 5B on offer.
Eurobond Market: Yields for the papers were mixed in last week’s market action, with yields on 2 (KENINT 2024, KENINT 2027) of the 6 outstanding papers rising 72.6 and 3.8 basis points (bps) week-on-week to reach 12.036% and 10.056%, respectively. Across KENINT 2028, KENINT 2032, KENINT 2034, and KENINT 2048; yields fell 2.7, 19.7, 20.8 and 13.3 bps to 10.417%, 10.509%, 9.706%, and 11.011%, respectively. On aggregate, yields were up 19.9 bps week-on-week.
What Else Happened This Week
⛽ November/December Fuel Prices: In its pump prices review for the November/December cycle, EPRA has reduced Nairobi retail prices for Super Petrol, Diesel, and Kerosene by KES 1. The price of diesel has been cross-subsidized with that of Super Petrol, while a subsidy of KES 17.68 per litre has been maintained for Kerosene.
📉 Electricity Bills Down: Domestic electricity bills are down 3.6% to KES 1,237.2. This is a result of a 10.3% decrease in the Fuel Cost Charge (FCC) to KES 6.36 per kWh and a 4.9% decline in the Foreign Exchange Fluctuation Adjustment (FEFRA) to KES 1.41 per kWh.
🌽 Duty-Free GMO Maize Imports: The government last week opened the window for imports of GMO products, starting with maize, in a bid to plug the gap occasioned by the prolonged drought and escalating maize flour prices. The government expects to acquire 10M bags from the operation.
“There is no harm in adding GMO to the list of the very many things that can kill you in this country. That is why we have deliberately decided to allow GMOs into this country until we are satisfied that we have enough maize, the staple food. Tomorrow I’m signing a gazette notice to allow for the importation of GMO maize duty-free until we achieve food security because that is our cardinal responsibility as government.”
Trade Cabinet Secretary, Moses Kuria
🛢️Turkana Oil Update: In its November Trading Statement & Operational Update, Tullow Oil, with operations in 5 African countries, noted that it is in the process of securing a strategic partner for the development project. The firm is also seeking an extension of the Field Development Plan (FDP) review period.
⚡ Ethiopia Electricity Exports to Kenya: According to Ethiopian Electric Power, Ethiopia has started exporting electricity to Kenya following a week of testing of a new transmission line. The exports are part of a 25-year Power Purchase Deal between Kenya and Ethiopia to be realized in 3 phases.
Interest Rate Watch
🇷🇼 Rwanda: The Monetary Policy Committee (MPC) of the National Bank of Rwanda hiked its key interest rate by 50 bps to 6.5% in its November meeting. In February and August, the apex Bank hiked rates by 100 bps in each sitting, bringing the aggregate impact to 150 basis points in 2022. The annual inflation rate stood at 31% in October from 23.9% in September.
🇳🇬 Nigeria: Annual inflation in Nigeria increased for the ninth straight month in October to 21.09% from 20.77% in September. The MPC of the Central Bank of Nigeria (CBN) is scheduled to hold its 288th meeting on the 21st and 22nd of November. In its last sitting, the MPC hiked the key rate by 150 bps to 15.5% and has delivered a cumulative hike of 400 basis points in 2022.
🧾 Upcoming Decisions: In the coming week, Kenya, Zambia, Angola and Eswatini are set to deliver their interest rate decisions. The current benchmark interest rates stand at 8.25%, 9%, 19.5%, and 6%, with inflation currently at 9.6%, 9.7%, 16.68%, and 5.8%, respectively.
Charts of the Week
