Friday, July 18, 2008

Classic Dilemna: Diamond Trust or NIC?

Both mid-tier banks with niche markets, but are now gearing up to generate revenue from areas they previously didn’t do. DTB from East Africa coverage, NIC from brokerage.
Both with almost matching P/Es and dividend yields.
Both medium-level performers i.e. neither bullet-train performers like Equity nor duds like BBBK.

Bottom-line: it’ll come down to:
  1. First quarter (2008) performances-i.e. survival rate against significant external environment “ishoos”: NIC 31% YoY; DTB 60%
  2. My expectations of rest of year: NIC will book significant upside from Safaricom IPO and NSE consequent volatility in stock-trading; DTB will reap from is expansion into EA.
  3. My expectations for the duration of the presidential cycle: NIC- I like the online banking venture (yes it’s limited by internet penetration, but think post-fibre optic). Also, possible close association with ICEA. DTB-I like the expansion into Burundi, proceeding TZ (where DTB is majority shareholder of subsidiary); Ug (holds 27%). Both are expanding branch network so as to increase deposits.
    I normally prefer investing the capital in the stock with bigger prospects, but on these two, I may just have to spilt the capital.

Hmmm. Interesting minister we have for National Heritage


coldtusker said...

DTB... better growth prospects since the other markets are smaller than Kenya's but more competitive...

Brokerage is tough... Lots of competition...

Ssembonge said...

As a consumer I would go with NIC. I like their Move banking concept. BTB is a relic and I've never seen their branches save for the old one that used to be on Moi Avenue.

MainaT said...

CT-Yes, regional expansion presents a lot of upside for DTB. As for the brokerage industry. NIC Capital is the new broker i.e. a broker that trades as part of a well-capitalised bank.

Ssem-Was in Nai in Dec and you can't miss DTB because its splashed its name all over the CBD. Its come out of its "Asian" niche.
My choices may well be driven by another outside factor (my current holdings of the two). As such, I have also looked at which of the two buys will dilute or enhance the holdings.