A brief Introduction
In terms of branch network, KCB Group is the biggest financial insititution in East Africa with 456 branches and an asset base of Kes 1.21 Trillion Shillings. The bank is Publicly quoted on the Nairobi Securities exchange under the ticker KCB:NSE. They recently announced plans to acquire a bank in DR Congo
KCB released its Q3 2022 earnings report today before the opening bell. The stock shot up immediately. It was last trading at Kes 40 +6.24%. You can track the banks share price here. Here is whats in my notebook:-
FINANCIALS:
Asset base surged 13.7% y/y to stand at Kes 1.27 Trillion driven by +16.6% y/y growth in loan book and a 19.1% y/y increase in government securities.
Customers deposits grew 7.3% y/y to stand at Kes 922 Billion.
Shareholder funds rose 15.3% y/y to stand at Kes 183 Billion.
Net interest Income +9.8% y/y, Non Interest Revenues + 30% y/y driven by forex trading income. Total Operating Income surged +15% y/y.
Total Operating Expenses +11.3% y/y helped by 22% y/y drop in loan loss provisions.
EPS +21% y/y to stand at Kes 12.64. Dividend Per Share unchanged at Kes 1.
Net Non Perfoming loans surged +95% y/y to stand at Kes 70 Billion. Total risk weighted assets +17.7% y/y.
POSITIVES:
Total Operating Income is growing faster than Total Operating Expenses. In finance we call this Positive Jaws.
The interim dividend was a surprise and reflect increased confidence in earnings growth going forward.
NEGATIVES:
Surge in Non Perfoming loans.
Total risk weighted assets is growing faster than shareholder funds. There is pressure on those capital adequancy ratios.
VALUATIONS:
At Kes 40 +6.24% share price gain today. KCB trades on a forward PE Ratio of 3.16, Price/NAV ratio of 0.65 and a trailing dividend yield of 7.5%.
CONCLUSION:
This stock is dirty cheap. I expect Annualised EPS for FY2022 to come in at KES12 +12.7% y/y. I think there will be a slight uptick in loan loss provisions in Q4 2022. I expect growth in net interest income income to slow down due to a surge in cost of funds. I'm also expecting total dividend to remain unchaged at Kes 3. That’s still a juicy 7.5% gross dividend yield if you buy now! I repeat this is a no brainer!
KEY DATES:
Book closure for Kes 1 interim dividend is 8 December 2022.
Payment Date is 23 January 2023