Investing in the stock market: Analysis of half year 2023 banking sector results

Total deposits closed at Ksh 5.1 billion. The sector gross non-performing loan deteriorated to 14.5% from 14% in March 2023. Profit before taxes for the half year was Ksh 91 billion. Banking sector liquidity stood at 49.7% above the statutory requirement of 20%.

Listed banks recorded consolidated financials inclusive of regional and non-bank financial services subsidiaries.

Profitability

Stanbic Holdings was the fastest growing bank with a forty seven percent growth in profits after taxes to Ksh 7.1 billion. Absa Bank Kenya came in second with a thirty two percent growth in net income to Ksh 8.3 billion while Standard Chartered Bank recorded a twenty eight percent growth in profit after tax to Ksh 6.9 billion. NCBA Group closed the period with a twenty percent growth in profits after taxes to Ksh 9.3 billion.

KCB Group saw a decline in its half-year earnings by twenty percent to Ksh 15.6 billion relating to mainly because of spike in its non-performing loan loss provision to Ksh 10.2 billion from Ksh 4.3 billion in the same period, a year earlier.

Equity Group Holdings remained the most profitable bank with a seven percent growth in profits after taxes to Ksh 25.5 billion. It also had the highest operating income of Ksh 82.9 billion, driven by a forty two percent growth in non-funded income to Ksh 35.7 billion.

Balance Sheet

KCB Group is on the brink of reaching the Ksh 2 trillion in asset base mark as it closed the period ended June 2023 with Ksh 1.86 trillion in assets followed by Equity Group at Ksh 1.6 trillion.

Regional subsidiaries business

Equity Group took the victory lap in profits from regional subsidiaries with profit before taxes of Ksh16.9 billion with the star performer being Equity BCDC, its DRC unit which saw a 130% rise in profit before taxes to Ksh 8.9 billion.

KCB regional subsidiaries contributed to 23.8% of its group profit before taxes up from 16.9% in the same period last year. TMB, its DRC subsidiary alone brought in Ksh 3.3 billion in pretax profits.

The crown jewel for NCBA was the performance from its regional subsidiaries in Uganda, Tanzania and Rwanda which all saw their pretax profits delivering profits before taxes of Ksh 1.4 billion to NCBA Group.

Bancassurance

The listed banks recorded mixed results in their insurance businesses with the below pretax profits

 KCB Bancassurance Intermediary Ltd +15% to Ksh 476 million

 NCBA Bancassurance Intermediary Ltd +26% to Ksh 136 million

 Equity Bancassurance Intermediary Ltd -17% to Ksh 370 million

 Equity Life Assurance of Kenya (ELAK) +468% Ksh 320 million

 Co-op Consultancy & Bancassurance Agency Ltd flat growth to Ksh 591 million

Stanbic Bancassurance Intermediary Ltd on the other had recorded a thirty percent growth in profit after taxes to Ksh 53 million

Overall, the industry is facing pressure from rising non-performing loans and interest expenses. Stanbic, Absa and NCBA were the only 3 listed banks that declared interim dividends. All the listed banks except Standard Chartered Bank Kenya are trading below their book value.

Investors seeking to take advantage can open a CDS account through a stockbroker or investment bank or use Dosikaa app. Investing in the stock market is for the long-term and ensure to invest only after you have set aside an emergency fund and sought the advice of a CMA-licensed stockbroker or investment bank.

Happy investing

By Robert Ochieng, CEO of Abojani