reports
- Marine Leleux
- Maureen Schuller
- Suvi Platerink Kosonen
- Faith Mwangi
Absa Kenya: 9M 21: Bank hits management ROE target of 20%; new level s...
ABSA Kenya has released its 9M 21 results, which see EPS jumping to KES1.52 from KES0.35 in 9M 20. The key performance drivers include: 1. The exclusion of separation costs following the completion of the rebranding programme. In 9M 20, separation costs accounted for 36% of PBT; 2. Loan loss provision charges decreased 55% yoy, further lifting earnings; 3. Operating costs declined 3% yoy; and 4. Revenue was still weak on a lower net interest margin (50 bps decline qoq) and ...
- Faith Mwangi
Kenya Banks: Sector Q3 21 PBT jumps 68% yoy, and outlook for Q4 is pos...
Kenya banks' sector-wide profit before tax (PBT) grew 68% yoy in Q3 21, according to the latest data from Central Bank of Kenya. On a cumulative 9M 21 basis, PBT increased 63% yoy. Of our covered banks that have released results, KCB Group leads the pack with a 131% yoy jump in 9M 21 PAT, Equity Group comes in second with a 78% yoy increase and Co-op Bank comes in third with a 19% yoy rise. Some key trends in Q3 21 earnings performance include: 1. Improved asset quality with industry NPL rati...
- Faith Mwangi
Kenya banks: Lucrative SME potential undercut by low yields and asset ...
The Central Bank of Kenya (CBK) has released a new study on small and medium-sized enterprises (SMEs), already an important sector for Kenyan banks but one with a great deal of growth potential. Our key takeaways on what the report means for the banks we cover: 1. SME SEGMENT ACCOUNTS FOR 20% OF INDUSTRY LOANS, BUT THERE IS UNTAPPED POTENTIAL The management teams of the Kenyan banks we cover argue that the SME sector is the next growth frontier. In our view, though, the majority of their loan...
- Faith Mwangi
Absa Kenya: End of rebranding costs and lower loan loss provision char...
Absa Kenya released H1 21 earnings where EPS more than tripled to KES1.03 from KES0.11 in H1 20. The key driver of earnings was the completion of the rebranding programme, the expenses for which accounted for 51% of PBT in H1 20. In addition, loan impairment charges declined by 64% yoy. Pre-provision profit grew 14% yoy, which was a standard performance, in our view. WE RETAIN OUR HOLD RECOMMENDATION While the bank is well-capitalised and able to mobilise cheap deposits, our key concern is m...
- Faith Mwangi
Kenya banks: Profit before tax up 97% yoy in first two months of Q2
According to the latest data from Central Bank of Kenya, the country's banks recorded a 97% yoy increase in profit before tax (PBT) for the first two months of Q2 21 (April and May). In the first five months of 2021, PBT increased 42% yoy, which is still a strong performance for the banks. We believe the performance was mainly on the back of three factors: 1. Lower provision charges given that Q2 20 saw banks accelerate their cost of risk to counter the asset quality weakness related to Covi...
- Faith Mwangi
Kenya Tier 1 banks benefit from agency banking surge; Equity Group lea...
According to new Central Bank of Kenya (CBK) data, total agency banking transaction value in H1 21 grew by 52% yoy to KES3.3bn. This was on the back of a 10% yoy rise in registered mobile money accounts to 67mn and a 23% yoy increase in overall agency transaction numbers. The growth in overall transaction values tallies with the continued shift to digital transactions that the pandemic has accelerated. The value per transaction increased by 11% yoy to KES3,029, boosted by clients increasingly...
- Faith Mwangi
Kenya banks: Four ways M&A could transform the sector
In the final report of our series on mergers and acquisitions in Kenya banks – we previously traced its history and concluded that the country is overbanked relative to African peers – we examine the banks we believe would be targets for M&A deals going forward.
- Faith Mwangi
The fourth wave of Kenyan M&A: Lessons from Nigeria and Ghana
Recently, we looked at the history of mergers and acquisitions in the Kenyan banking sector and the coming "fourth wave"; in this report, we examine what the processes of consolidation in Nigeria and Ghana can tell investors about what to expect in Kenya. Relative to other major economies in Africa, Kenya is over-banked, which supports our view that consolidation activity is likely and desirable. By our estimates, if Kenya is to match its peers in the list of the biggest 10 African economies,...
- Faith Mwangi
The complete history of M&A in Kenya banks – the fourth wave is here
In this new series of reports, we consider the theme of mergers and acquisitions in the Kenyan banking sector. In the past decade, there has been a notable increase in consolidation and in this first report in the series, we trace the history of mergers and acquisitions in Kenya banks and identify the drivers of future consolidation activity. Kenya has been through three significant phases of mergers and acquisitions, which were mainly prompted by bank failures. We believe we are now in the f...
- Faith Mwangi
Absa Kenya: Jump in Q1 21 earnings as separation costs missing in inco...
ABSA Kenya released Q1 21 results with EPS rising 24% yoy to KES0.45. Core earnings were unimpressive with net operating profit down 1% yoy on a decline in non-interest income and a jump in loan loss charge. Unexpectedly, the separation costs in relation to the transition from Barclays Kenya to ABSA Kenya were absent. We had anticipated these costs to remain within the bank's earnings, but to a much less extent than before. In Q1 20, the separation costs had accounted for 16% of net operating...
- Faith Mwangi
Kenya banks: Strong rebound in Q1 as profits surge by 20%
According to data from the Central Bank of Kenya, banking industry PBT increased by 20% yoy in Q1 21. On a qoq basis, PBT increased by 94%. According to the regulator, there was a slight decrease in income (5% qoq), which we believe is largely related to lower loan yields in the quarter. Earnings were boosted by a decrease in expenses by 23% qoq, which we believe was related to lower loan loss provision charges. Overall, the industry ROE was 22.0% in March 2021 compared to 20.4% in March 2020...
- Faith Mwangi
Kenya banks: Regulator ends Covid restructuring regulations, as expect...
The Central Bank of Kenya announced that it will not be extending the regulations allowing restructuring of loans. The allowance to restructure was implemented in March 2020 and it allowed banks to save on capital as some borrowers facing weakness could be extended moratoriums and restructured loans which reduced the need to make loan loss provisions for them. The end of this allowance was expected, in our view. On the downside, we expect NPLs to tick up as from Q2 21, driven by restructured ...
- Faith Mwangi
Absa Kenya: FY 20 earnings fall on separation costs and loan loss prov...
ABSA released FY 20 results with EPS falling 44% yoy to KES0.77. A rise of 115% yoy on loan loss provision charge and a 109% yoy growth in separation costs were the key factors dragging down performance. The separation costs included a voluntary retirement scheme carried out in FY 20 and marketing activities. We expect separation costs to remain on the books for another two years. Overall, pre-provision profit underwhelmed, growing by 8% yoy. C30% OF LOAN BOOK RESTRUCTURED IN FY 20 The bank ...
- Ayobami Omole
- Faith Mwangi
Kenya: New data show soaring digital payments
The Central Bank of Kenya (CBK) released digital transaction data for both banks and telcos in 2020, showing strong growth in digital payments and a decline in card transactions. In this report, we use the data to compare digital transactions in Kenya between July 2019-March 2020 (pre-pandemic) and April-December 2020. This allows us to assess the impact of the regulatory changes in March 2020 when fees on transactions were reduced and the upper limit on transactions increased. OUR KEY OBSERV...
- Faith Mwangi
Kenya banks: Profits fall by 29% in FY 20 on weak asset quality
According to data from the Central Bank of Kenya, total banking industry PBT fell by 29% yoy in FY 20. On a qoq basis, PBT fell by 19%, which we believe was related to accelerated cost of risk given weaker asset quality. This is not entirely unexpected considering that out of the banks we cover (which account for about 65% of total industry profit), four of them have issued profit warnings (signalling PAT in FY 20 will fall by more than 25% yoy). The banks that have issued profit warnings are...
- Gerald Muriuki
GENGHIS CAPITAL PLAYBOOK 2021: Navigating the Now Normal
Dear Investors,No, that’s not a typo. The theme is just what it is, ‘Navigating the Now Normal’. The COVID-19 shock upended the world last year with far-reaching consequences; an earthquake of a magnitude 9 comes closer. While the rollout of the vaccines this year are meant to be a shot in the arm (no pun intended) to global economies, we are alive to the fact that the pandemic’s scars will still linger longer. Not only has COVID-19 exposed the domestic economy’s soft spots, but the spillover e...
- Faith Mwangi
Absa Kenya: Q3 earnings improve but remain unimpressive; reiterate Hol...
ABSA Kenya has released its Q3 results – EPS was down 21% yoy to KES0.25, which was better than Q2’s loss per share of KES0.25. On a cumulative basis, 9M 20 EPS was down 65% yoy, to KES0.35. Net interest revenue remained flat for the quarter on a lower net interest margin, coupled with weak balance sheet growth. Non-interest revenue was weighed down by an 11% yoy decline in fee and commission income in light of the ban on fees on digital transactions and low loan book growth. Operating costs ...
- Faith Mwangi
Absa Kenya: Q2 20 — A loss-making quarter; reiterate Hold
ABSA Kenya released Q2 20 results with the bank making a loss per share of KES0.25 from an EPS of KES0.32 in Q2 19. Loan loss ratio accelerated to 5.4% from 1.8% with 55% of the loan loss charge being precautionary Covid-19 provisions. The bank also experienced one-off separation costs of KES1.6bn, which also made an impact on earnings. Profit before the loan loss provision charge and one-off items was up 9% yoy with lower operation expenses mainly lifting performance. On business performance...
- Faith Mwangi
Kenya: Restructured loans escalate as Covid-19 bites; negative for ban...
According to the Treasury Cabinet Secretary, Kenya banks have restructured a total of KES360bn in loans as at June 2020. This represents 13% of total loans and is an increase from the 9.6% reported by the Central Bank of Kenya in April. Of these, personal household loans accounted for 53% of total loans restructured against a backdrop of continued job losses and pay cuts as well as shutting down of key employment sectors including tourism and horticulture from the Covid-19 outbreak. This is n...
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