The "too big, please don't fail" banks in Kenya

In this post, I talked about how banks can grow to a size that presents systemic risk to their domestic economies. That is, there are so large, that their likely failure would mean guaranteed govt assistance which would off-course mean every taxpayer peaks up the bill. Further, it was/is my opinion that such banks being deemed to be too large to fail and too expensive to rescue, should have applied to them, more stringent regulatory measures. The examples were higher capital and liquidity requirements to match their size or growth.

So do we have such banks in Kenya? The answer is yes:

1. KCB: At close of play in September 2009, KCB had a balance sheet of Ksh189bn, which si roughly speaking 27% of Kenya's total budget. It also has around 200 branches, 150 of those in Kenya. Thus its a large employer as well. Its collapse won't be pretty. Remedy: At 13%, its tier 1 capital ratio looks strong for versus some Western banks, but its target should be 20% or more given its host economy.
2. Equity: Holds just under 50% of Kenya's banking account population irrespective of the size of their accounts. And has 155 branches (130 of them in Kenya). Its collapse would lead to a severe dislocation SMEs and agriculture for which it serves a significant portion. I see its risk coming from liquidity rather than capital concerns. Remedy: Should be required to hold at least 12% of its assets in form of t-bills and or AAA-rated gilts.
3. BBK: At Ksh170bn (June 2009), its also a behemoth in the local economy. Included here because of its corporate client content which would again cripple our economy were it or the parent to collapse. Remedy: As with KCB, probably more suspect to lower capital thresholds and should thus be required to hold at least 15% tier 1 capital ratio at all times.
4. Co-op: The banker of co-operative societies and Saccos country-wide. And like Equity, therefore, carries systemic risk for the economy. Has a history of appalling size of bad loans coupled with political inteference. Remedy: Higher liquidity and capital requirements. The broker licence was probably a mistake.

Results Catch Up- NSE FTSE half yr

TPS Serena is recovering nicely from a tough 2008 and going by the visa queues at the Kenya High Comm recently, things should continue to improve.

StanChart surprised didn't it with an atypical 38% increase from H1 2008? The bottomline was driven by circa 24% growth in both interest income (and surprisingly nothing to do with govt securities despite the Ksh9bn increase) and F&C as well as flat expenses. In other words strong cost/income ratio. Capital ratios look tight. Still not a buy for me unless for dividend purposes (Ksh2.50 DPS will be paid in early Oct). NBK (an okay 11% uptick) and KCB also released some flat as a pancake PAT. Some high quotient analysis was done on the latter here. BBK's Adan Mohamed had a party after 5% rise on 2008 H1, but a couple of sobering points. Flat costs and vastly reduced loan loss provisions means there should have been a higher rise. But nothing came from the income side of the P&L. Finally, parent bank showed up with 8% rise despite a very challenging environment and did better than its rival clearing banks Lloyds TSB, HSBC. RBS may do better though.

ARM continues to defy high production costs with a 32% yoy increase in profits pegged on turnover growth of 16% and reduction in production costs. It remains despite its small 10% cement market the stock to watch out of the 3 cement sellers and infact one of the good picks from the NSE industrial stocks.

Olympia finally decided to announce its FY 2008 numbers. As expected, it rolled up with a loss though not as high as many of us had forecasted (Ksh56m). I suspect the numbers don't fit. For example, if you strip Ksh1bn for Plush, you leave Olympia where it was before it bought it. Smart...

NSE Banks: Q1 2009 Results

General comment: Across the board, banks have reduced lending from prior quarter. They are basically wanting to avoid additional defaults. YoY quarter profit growth is slim. Peer analysis should mainly focus on outliers:

Good outliers:

• Net interest margin- thanks to the GoK bond, NBK is enjoying healthy interest income without sweat. It'll be on-going for a while yet.
• Cost Income ratio- this is good because it basically translates to a higher return on capital the more you can get from each shillingi you spend. StanChart despite anaemic income growth, has managed (via use of technology) to maintain leadership here.
• Return on capital- both UK banks standout. No real surprise because this is something that tends to be return as a personal development goal for CEOs/FDs of many UK banks.
• Insider loans as prop of loans: Equity stands out for low prop. Insider loans are notorious source of loan book instability for Kenyan banks.
• Excess liquidity ratio: It bears pointing out that Lehman was brought down by lack of liquidity. Stanchart looks really strong. A bit strange given recent report about all banks but Equity struggling for the stuff.
• Capital/RWA ratio: Equity is standout. This ratio can make or break business. It signifies a bank's ability to grow, but also to absorb nasty stuff like loan loss provisions aka bad debt write-offs.

Bad Outliers:

1. NIM- NIC and DTB must be paying over the odds for deposits. I understand this is what prompted NIC to be among the first to loan rates last year.
2. Cost income ratio-KCB's burden. Equity says it is in its investment phase hence the massive increase in staff costs. Keep an eye out.
3. YoY PAT growth- Whats up KCB?
4. Fwd P/E- Given the lowered growth rate for the year, the fwd multiple for 2009 looks too rich for Equity. Ksh10 looks more comfortable until we see what Q3/4 brings in.
5. NPLs as a prop of loans- Equity (perhaps unsurprisingly given target class and seeing K-Rep), is out here. Several pts of note. Several yrs back, I remember a blogger mentioning that Equity recognises NPLs much earlier than other banks. I'll confirm this in another blog. 2ndly, because of its capital capacity, it can still absorb the whole of its NPL fairly comfortably.

Q1 results for NSE Banks

Q1 results will shortly be upon us. In bullish times, you tend to get pretty much every MIMS listed firm releasing some form of quarterly update. However, the opposite applies during these times of the bear. With the exception of banks which have to do so due to their mandate, I expect to see very few quarterly updates. In any case, for the banks, I am predicting near flat results of several banks with the usual exceptions. Loan defaults will be a feature of every earnings release this year from any bank and one should expect nasty surprises on the P&L depending on how well the particular bank has provided for npls so far.

Equity up 40% on Q1 2008 just because it has a bigger loan book compared to last year. I think its Waterloo moment will be Q2 when I can’t see it going higher than its Safaricom quarter of last year. Will start benefit of push in Ug by Q3 and beyond
KCB up 20% though I am expecting it to surprise in a positive way given its larger book vs q1 2008.
NIC, DTB 20% and 40% up respectively.
CFC down on Q1 due to the insurance business. Think link to NSE via its broker as well insurance arm.
BBK and Stanchart-I am expecting one of these to be down on Q1. Only, slightly but down nevertheless.

Intro: Mortgages in Kenya

A mortgage is a loan taken out to buy a house with the house acting as the collateral. This bears repeating. A mortgage is loan just like any other.

Basics:

For the borrowers

Things to consider are;

1. Can you afford a mortgage? A mortgage will rarely ever be less than your monthly rental. By itself. Once you add council rates, utility bills, furnishing, maintainance bills (these will be there whether the boma is new or old), you'll see your monthly costs go up by a third of your rent. So you must look at the likely monthly repayments. Your mortgage repayments will depend on...
2. Price of property: Prices have rocketed in Kenya though the upmarket areas are now seeing a much needed cooling off. I think the key driver was the cash-only buyers primarily remittances and these are already falling off. However, the lower end of the market has sufficient demand to see it continue growing but I doubt we'll ever see the frentic pace in the upmarket areas. Websites that will get you a feel for prices are many but a few are villacare; estates.co.ke; hassconsult; nyumbanet and uzanunua. Many think that there is a bubble in the market and this may well restrict your resell price should there be a marked corection.
3. Your deposit: The higher the deposit you put down, the lower the loan you need to borrow. And of course the lower the amount you want to borrow, the more interest rate options you get. The key criteria is always, are you better off reducing your monthly mortgage repayments compared to earning a return in some other form of investment. Put another way, can you invest the deposit in another venture that gives you more than say the 15% interest rate that you will save by oputting the deposit down? However, its rare in Kenya to get 100% mortgages so some deposit will be required.
4. Interest rates: There are two things you need to know about interest rates generally, the current rate and the future expectations of where interest rates will go. There are two types of interest rate deals that are currently offered in Kenya. Current interest rates are set depending on amount you want to borrow and duration (term) you want to borrow for. Variable interest which basically means that it moves as general interest rates. So future expectations become of added importance. And initially fixed interest rates. I have put together a little table that I'll update from time to time.
5. Monthly repayments: From the above, you should now have the bits that will help you decide what type of house you'll buy based on its monthly/annual cost. You just need to plug the numbers into this Excel equation... = PMT(interest rate/12,term*12,property price less your deposit). Alternatively, go here and input the same numbers to get your monthly payment.
6. Location: This is a feature unique to Kenya where some banks only offer mortgages in specified towns. Reason is obvious.

For the lenders:

Important factors. With mortgages, its as important for the borrower to know what the bank will look for before lending.

1. Income expenditure gap: Most lenders want to know that should they have to or decide to jack up interest rates, there is enough of a gap in your income-expnditure to allow for this. So for example CBA won't allow repauyments that sccount for more than 50% of your monnthly income.
2. Loan to value ratio: aka LTV. Should be no greater than 80% or anticipated price correction at time of appplication.
3. Income mulitples: Simply put this is the ratio of your annual gross salary to mortgage amount required. Prudence dictates that this shouldn't be more than 4 times.
4. Screening reqquirements: Many banks tend to have more onerous requirements when they want to reduce lending and vice versa when they want to increase it.
5. Other mortgage set up costs: These are noticeably higher in Kenya and include stamp duty, legal, processing fees et al.

Final point.

• Take a mortgage to suit your stage in life. If you are young or have a young family, you'll surely be making a move to another house at sometime in your life. Therefore, consider a mortgage as you'd any other investment. Without getting emotional.
• Late edit: If you are in the diaspora, avoid if you can, taking a mortgage in Kenya and if you already have one, exchange it. The difference in interest rates is just too big especially now. Instead, borrow from a local bank at a lower interest rate and buy the property or pay off your Kenyan loan. Kama ni makaratasi, find somebody who can do this in exchange for your title deed and an agreement.

BTW: the word mortgage is of French origin and literally means dead pledge.

NSE weekly catch up: you know the drill

Another week, another push south... This week it was supported by global sell-off (FTSE closed down 8% on Monday's opening). Geithner needs to start walking or he'll mess up the script for Obama.

Why would you do a stock spilt at the start or middle of a bear market? Despite strong numbers, strong momentum going forward, Equity’s announcement of a stock spilt has had the opposite of the intended effect. Its arguably the 2nd faux pax after the about doing a 2nd ipo for the principal shareholders. Apparently BDA was told or thought the idea was to make Equity less expensive. Jeez, are we NSE investors that stoopid? 142 is just a number just like 1. It only gets a meaning when you put an EPS or DPS against it. I think we are seeing the first signal that NSE has drained all the speculative retail investors leaving battle-hardened experienced investors who ignore noise.

BBK released FY08. As did NIC. Excellent results given its constrained deposit gathering capacity. PAT was up 39% on 2007 driven by 56% rise in F&C. It will give a 1 for 10 bonus share for shareholders in its books on 19th March. I would have been interested to see how the various parts did and especially NIC Capital, but I guess that will wait until annual report is on its website. NIC is a steady 30-40% growth bank doing things quietly (bought into TZ's Savings & Finance and obviously got the broker licence in ’08). Won’t surprise me if it comes in with similar growth for 2009. In terms of its peers, I'd now pick DTB, NIC and CFC in that order only because NIC still lacks NSE visibility.
Sameer Africa also released. It sells tyres. Therefore ceteris paribus, if car population goes up, tyre demand will go up. But it has to import most of its tyres so fx comes into play. It still managed to increase EPS by 5% due to “other operating income”. More at coldtusker. EABL released interims. DPS is Ksh2.50 equating to 4% yield.
Cheserem for CMA chair? I won’t say much, but this dude destroyed the best chance of ever catching Pattni & Goldenberg…
Kibz came in when NSE was circa 1,000. Will he leave it there when he goes in 2012 given that’s he seems determined to do that with everything else? Waiting is a virtual…

BBK results-Thanks NSE

Well, I think NSE picked up (or somebody emailed them), on the fact that the BBK pdf was scanned in a rush and showed irrelevant info and have rectified the scan to show the P&L and balance sheet numbers. Still showing 12% uplift from 2007. So no improvement there. DPS is Ksh1.50. Loan loss provision is understated and will probably be higher this year...
Kudos NSE

Barclays credit rating downgraded

I think this may explain some of the fall in the share price week before last. It'll make for more expensive wholesale funding. Will it change Barclays' mind about accepting government funds? Definetely. I think it'll probably within the next 6 months as defaults rise...

2008 Investing Highlights

This was me end of June, this is me today:

Kenya
Sold: In the money (NMG, TPS, ARM, NIC) & Out of the money (BBK, EA Cables)

Reduced: KCB

Switched to: Equity, Cash

Hold: Equity, AK, miniscule KCB (2,500 shares) & Safcom & Cash

TZ
Bought: Dar es salaam Community Bank

Zambia
Bought: Pamodzi Hotel

Theme has been to move from diversification of risk to concentration of gains. Has it worked? Yes and would have been even more fruitful if I had kept to one of my golden rules of never adding more shares unless the price of the said stock is lower than my average cost so far. I got punished for buying AK at Ksh33.50 thus driving my average for it to early 20s and Equity at Ksh301 and Ksh250 thus driving average to mid 120s.

Overall for the year: average i.e. below 30% gain. Had to rush out of BRIC nations just to stay in the money and NSE has been so-so but thankfully my offloads were all in July/Aug time.

Other investment decisions:
Good ones: Missed out on SIB’s private placement. Having opened a trading account and just about to send the funds to buy some shares at Ksh120, I once more request ed a copy of its accounts. Still not received even today. In the meantime, I now hear that the initial placement failed and subsequently the shares were retailing at ksh30!
Tough ones: After sweating to set up the investment club, I decided to move on because of strategic differences. So why I my still blogging as KCIG? Investment club changed its name.
Bad ones: Hesitated when was Equity was Ksh116…

Investing resource: Thanks Aly Khan for the live prices streaming. Some of my last minute price adjustments relied on the live feed.

Key learnings: Self-discipline, early bird mentality and thereafter liquidity and investors confidence are the key ingredients that turn good company/market fundamentals into investor bounty.

Kenya Listed Banks: First Half 2008

Update from this and this. I've removed CFC Stnabic because their numbers don't make sense i.e. no restatements as required.

Some stocks are very cheap. Notice KCB's PE is half that of Equity and then think where both will be at the end of 2009...Supply, number and calibre of investors who hold either stocks may have played a role, but fundamentals have also influenced.

Although I normally invest on fundamentals, this article reflects some of the thinking around some of the stuff I've done so far in this 2nd half of 2008. The world of investing is changing...

B&B surprise for H1 2008

After growing by a paltry 7% in the first quarter, Barclays Kenya turned this around with 24% growth for the whole of the first half. BBK says it made Ksh1.7bn in Q2 alone. So I was curious to see how it had done this. Income was slightly higher perhaps driven by more business days in Q2. The main driver was actually lower other operating expenses in Q2.


Bamburi also had a super half coming in 21% higher than the same half last year. These are very good numbers for two reasons. External factors were at their for sometime in this half. Fuel prices rose dangerously and ofcourse the Janaury political clashes would have cut-off the supply lines to customers. Hima, its subsidiary in Ug, also suffered from power rationing. Secondly, its bitter rival Athi only grew by a disappointing 24% from a lower base. This despite the fact that ARM has a more balanced income generating portfolio of products.

RIP Bernie Mac.

Bumper Q1 Bank results- why not BBK?

Banks like Equity, KCB have defied predictions by professional and amateur pundits about their Q1 2008 results. Equity saw 81% yoy growth driven by Ksh1.1bn income growth, which is crazy given that Q2 will be a phenomena. KCB saw 63% growth with a humongous Ksh2.1bn growth in income . Not so BBK with virtually unchanged PAT from 2007's first quarter. Though income grew by Ksh1.6bn, Ksh0.8bn of this was eaten by additional staff expenses and the rest by operating expenses i.e. more branches? So why oh why did I bother buy so much of this BBK stock last year rather than even NBK? Chasing mirages, that's what...

Banks Results for 2007

In the context of 2007, every bank should have seen at least 10% growth owing to an economic growth rate of 7%. And that is to stand still. BBK and KCB show the advantages and disadavantages of being huge. Being huge, you can lend big, but then in Kenya you need to lend small in order to generate the volumes that we'll give above average profit growth. The other issue is that it takes a revoluntary leap for you to see the profit growth that 
would make shareholders flock to your shares.  BBK is a worry in this respect. A 24% increase in net interest income from higher lending was wiped by the costs required to get it that growth. Could that be KCB several yrs down the road? It has to grow aggressively outside Kenya.

Apart from Equity, the other stand out banks in the above list are CFC and NIC and DTK. CFC is of course presently the only universal bank in Kenya, but seems to be suffering from because its banking division was actually profitable in 2007 but it made a loss on group basis because of its life business. Both DTK and NIC are building themselves niches and doing so profitably. The  branch expansion to increase customers and geographic reach will mean that they can both continue to 
see profit growth over the coming years.

Results Update

BBK announced frankly disappointing looking numbers and will be the worst among the listed banks (blog on this later). However, if one adjusts for the Ksh1bn spent on new branches and increasing ATMs, the numbers look okish. Apart from bad debts in 2008, the other is issue of concern is that potentially, there will be continually higher staff costs from the additional 4,000 staff.

StanChart has pleasantly surprised with a 32% rise from 2006 driven by FX and Other commissions. Moreover, its been a great year if you are a shareholder of StanChart because adjusting for the shareprice differences, it has a superior div yield and its share price appreciation
 is similar to BBK's . Even better for us NIC shareholders.  NIC hit 63% rise.
Bamburi saw very strong results on 34% rise in turnover but had Ksh2m wiped of its cashflow due to clinker expenses. It paid a very good dividend for the yr though at Ksh6.

Also announcing interim and others were KPLC, EA Portland (54% down on costs from Clinker), KRe got hit by higher claims but saw 9% rise in PAT due to lower tax rate ; KPLC saw flat turnover and hence slight PAT rise (4%).

What stocks I my investing in

Shanga has asked me what stocks I'm investing in at the NSE. Firstly a general comment about the current stock-investing environment. Its tough worldwide. Reason. Hotmoney aka money from western funds; sentiments about the US economy and of course, credit crunch are all making guys run around the world stock markets like headless chickens. Thus making quick bucks is not an option. In some markets, only risk-takers and those with a one yr+ view are buying.
As for the NSE, the positions I've taken so far this yr have either been based on companies with long-term prospects or for defensive reasons. By defensive I mean averaging. I haven't sold anything yet this yr because apart from Equity, the others haven't reached fruition and I believe they'll.

TPS- Because despite the tourism issues and the fact that 67% of its revenue is from Kenya, nobody does hospitality better in the whole of East, Central and Upper Southern Africa than Serena.
Athi River because it has a good base to go forward. And its not exclusively dependant on revenues from cement.
EA Cables, because Mugo the CEO is not yet 40 and has plenty of good ideas

1. Fibre-optic to take advantage of TEAMS, SEACOM and other under-sea cable projects coming online from 2009 onwards. And of-course, copper is expensive
2. Regional expansion. Most of its turnover growth for 2007 came from outside Kenya
3. Linchpin of Transcentury, therefore has strong shreholder support
4. Any price below Ksh40 is a buying ooportunity for this stockDiamond Trust because trust me its going places.

Barclays for defensive purposes and also because its very tempting when its under Ksh65 as it was a
few weeks back. EABL for the dividend tu.
On my watchlist remain AccessKenya and KCB.

Landmark French case, Obama, BBK

A landmark anti-corruption case is in the offing in France. France probably has the most sleaziest politicians corruption-wise in the West. The majority of its recent prime-ministers or presidents were involved in corruption cases. Chirac with shenanigans in Paris when he was mayor, Mitterrand and his era marked by top officials having to be fired and so forth. Suffice to say, African corrupt leaders used to feel right at home in Paris. Not anymore, activist lawyers are supporting African Diaspora in France to launching cases against Omar Bongo of Gabon; Dennis Ngeusso of Congo; Compadore of Burkina Faso; Obiang of Equatorial Guinea and the old man of Angola dos Santos. All live a life of luxury and whats more, many never thought they would get caught so they'd flash £300k here on a car, buy two or three flats in the most expensive street in Paris etc. And charge the expenses to their respective Treasury Ministries. It doesn't they'll be jailed in France, but all those assets could be seized and used to fund the citizens
 of their countires. Beware m-o-1 and your corrupt Kenyan pals.

Obama looks like he is edging his way into the Democratic seat, but there is some way to go. However, should he win the dirt from the Republicans will be one which will make you want to bust a move on your TV. Should he have Hilary as his VP? Personally I don't think so because the republicans would have her for dinner, breakfast and lunch.

As I expected, Barclays announced poor results for 2007-in the context of an economy that grew at almost 8%. A 24% rise in its income was wiped out by an almost equal increase in costs although some of the costs were one-off costs in re-opening branches and setting up some new ones. However, rather than take the opportunity to legitimately increase provisioning for bad debts to anticipate this year’s inevitable rise, it actually reduced provisioning! Incredible.

The NSE & the Kofi mediation

As a general rule, I find an over-concentration on politics not only  soul destroying but also reminds me of that primary school saying that empty dembes make the most noise. Thus with our great nation dominated and adversely impacted by siasa mbaya, the adverse effects are being felt on our economy.

With 44% of our population classed as being below the poverty line (i.e. earning less than a dollar a day), the urgency of getting our economy growing constistently for like 10 + yrs, means that if a complete overhaul of the constitution is what it'll take to avoid the 5yr need to slaughter the "outsider" communities, lets get it done pronto. I was speaking to a friend who is in the insurance industry back home. On a normal month, he'd expect to write between ksh1-2m of new business. In Dec, he actually had one or two contracts of around that amount ready to sign in Jan. As it is, he hasn't written anything in January. Which is ironic given the prevailing situation where many businesses in Eldoret and other towns west of it are finding that the only way of redeeming their investments is to go for the Ksh1bn thatKibz announced. Reason? Many didn't insure their businesses. Tell me,when you have a business perhaps transacting ksh1m per month or more, shouldn'thave insurance especially where you have stock?

The bourse continues to sway back and forth and is now reflecting the fears and uncertainties about the direction Kenya's economy will take should are solution not be found. What remains on my stockwatch: AK, EABL/BBK ( for defensive purposes), EA Cables (who is its competitor for the fibre optic market?) and as always Equity should it breach KSh120.

As an aside, changes in the NSE matters to different people in different ways (an oxymoron I know). As an investor, when you want to know the value of your portfolio, you don't pay attention to the index movements, but to what you hold. Hence, I tend to follow the market cap number more closely than the index itself. For stockbrokers, market turnover matters most because that is what dictates their commission. For pension funds and unit trusts, it's the index. For hedge funds it's the volatility of the index. To gauge market sentiment, have a look at the volumes being traded (although its better to look at bid vs. ask). Long-term prospects are another matter.

Anyway, in my etravels, I picked up three articles worth a read. By the way, I think it's true what they say, if you repeat a lie enough times,it become a truth. Sample  George Bush and weapons of mass distraction in Iraq; the myths about who dominates who in Kenya. In all this I forgot that out of Kenya's 44 yrs of independence, m-o-1 ruled 24 of them...

1. David Anderson article on kenya's siasa mbaya
2. That article about RV's warlord
   
3. Senegal president's take on Sino-Africa relationship.

Friday Shorts

The French have a healthy contempt for the English and the Anglo-Saxon economic model. Jérôme Kerviel is thus a hero in France because he brought down the model in France. In the UK, they are saying he went berserk because he was working long hours for a Frenchman-30 hours per week.
Check this though, according to the FT;

• Check this though, according to the FT;
• Kerviel’s positions' loss before being discovered ($1.5bn)
• SocGen's loss due to sub-prime write-offs ($2.0bn)
• SocGen's loss due to unwinding of Kerviel 's positions ($3.4bn)
• So who should be fired and in the dock?
  
  

KQ has done the right thing by seeking to cut its costs in a period where its seeing 15% capacity in its planes. Anyone running a business will tell you, profit equals revenue less costs. If revenues are falling, you cut costs to maintain profitability. Should it get to Ksh40, it'll be tempting to get into.

Here is a paradox, I keep hearing that Nation's balanced approach to politics is unpopular and has led to lower sales, yet every time there is a breaking story you can't get into its website? Que?

Speaking to Nak-based cousins last weekend, I was worried by how fatalistic they sounded about the wars in their backyard. Both are businessmen so I really thought things were done for our economy. Lakini something tells me we may have turned the corner after we stayed at the abyss and didn't like what we saw. In which case, this was a prime buying week at the NSE. Imagine BBK at Ksh64!

EasyCoach's cancellation of its service to Western Kenya and resultant job losses, makes me question the whole barricade brigade. Who will suffer most if you can't get goods or services into your region?

• 
  

More Q3 results

Athi River recorded 85% growth in PAT, aided by with T/O growing at 55%. Note that ARM is now benefiting from increased cement capacity its new plant. Secondly that it also generates  significant chunk of its revenue from building-related materials rather than cement. Its cash flow has improved immensely from prior yr when it was financing its new Clinker and servicing borrowing. Adding to this momentum is the deal in Kitui for coal and limestone. A good growth 
outside of the banking sector.

BBK saw 12% yoy growth for 9 months of 2007 with income growth being matched by expenses.. Hopefully at some point we'll start seeing the impact of its loan hawking activities on its P&L (an worryingly, on its loan loss provisioning). A nice defensive stock if bought under Ksh75.

NIC (one of my four long-term bets in banking sector), saw 44% growth. int Its income breakdown between interest income andF&C remains a puzzle to me. Compared to its half year results, where its income was primarily derived from NII, the 9 month numbers would almost suggest that it made a loss on interest income. I guess there must a lot of latitude on income claissifcation in Kenya. 18% income growth of was strongly supported by flat expenses. With funds in the bank (I expect the rights to have been massively oversubscribed because of the 2:1 bonus issue) and revenue augmenting moves, NIC is a must buy.

DTK, (my other bet for long-term in the banking sector) saw 67% growth with 71% growth in loans and advances generating 57% interest income growth. DTK was in the market again to raise funds (will just about get full subscription because of compe from NIC) as it looks to expand. Another bank that is shedding its traditional image in its hunt for customers and growth.

Barclays & the Credit Crunch, Political Savvy

Since the credit market started falling apart in May/June time, Barclays has been at the heart of rumours in the financial markets about their losses. Some went as far as to say that its losses were such that it would need Bank Of England's help. Which it did one day as paranoia took hold of HSBC. Its share price has fallen by around 20% since August (with a 10% fall just last week). The reason for the rumours is because BarCap its investment banking arm is mainly a fixed income house and has grown massively in the last few years. So jana, Barclays rushed out an earnings update to confirm a loss of £1.3bn far less than the £10bn that was rumoured. And with a big sigh of relief for its shareholders...

Although many refused to heed warnings about the pyramid schemes and were thus burned, the Sasanet investors seem to be an exemption because the scheme started off as a legitimate business. Fortunately for Mike Chege & his brother, most Kenyans for all the pelepele noise-levels on politics, lack political savvy. In the UK, the investors would have gotten together; roped in a couple of MPs;  done a large million petition and had their pictures taken outside 10 Downing Street (the prime minister's office) presenting him with a petition. The next thing, the Chege's of this world would be in jail for fraud with all their assets attached to claim back investors' money.