SA aims greater interaction with China in financial markets http://www.bdlive.co.za/...na-in-financial-markets | NSE, Shanghai Exchange deal postponed over JKIA fire http://www.businessdaily...64/-/cir3dt/-/index.html

watch this lion very closely.

Ever since the current KCB MD left Bamburi Cement, Bamburi's performance has been declining. My theory is he is either an excellent cook or a very bright chap. Your take????

@5x minimal brightness. top chef!

About time the value of the envisioned complimentary role of public & private capital at County level is unlocked. Chance favors the prepared? i.e KCB & others ~> President signs into law County Revenue Bill http://www.capitalfm.co....aw-county-revenue-bill/ ION, this might appeal to the conscience on Leadership ~> Museveni: I am not Jesus to fix all problems http://www.newvision.co....o-fix-all-problems.html

If the same BD is to be believed ...week ahead on pg 2, Monday 19th ,KCB and Stanchart to release half year financial results .

@guru.. I have heard the same vibe, he didn't particularly handle the recent retrenchment very well.

These KCB results will not be great, they have a 1B redundancy cost in them. In addition lending has only began to pick up at the tail end of the 2nd quarter. I think those buying at 45 are now gambling!

How many shares does the top management own? What does Kirubi know better than the management? Tafakari hayo

We maintain our BUY recommendation on KCB Bank Limited (KCB Bank) based on a fair value of KES 50.09 representing an 13.5% upside to current market price of KES 44.00. Our investment case is informed by sustained deposit mobilization (3 year forward CAGR of 14.6% in customer deposits) from a growing customer base across the East African region coupled with increased lending on the Corporate, SMEs and Mortgage fronts (3 year forward CAGR of 16.2% in the loan book). Cost management initiatives by the competent management in place should see acceleration of the Net Income which we estimate to grow at a 3 year forward CAGR of 16.0%. The bank trades at a forward P/E and P/B of 9.4x and 2.2x in line with the Tier 1 banks average of 8.8x and 2.2x respectively.

• NIMs to ease slightly on account of a lower interest rate environment– We estimate NIMs to decline 50bps from 10.5% in FY12 to 10.1% in FY15F, with a stable ratio expected in FY13E (10.6%). Notably, the Central Bank Rate (CBR) averaged 15.8% (with a high of 18.0%) in FY12 which saw the bank record 16.6% WAIR on loans and advances, while also paying 4.1% on customer deposits. The average CBR ytd stands at 9.1% (a high of 11.0% in Jan and currently at 8.5%) which has trigged banks to lower their lending rates, with KCB’s base lending rate at 17.0% compared to a high of 24.0% in FY12.

• Net Interest Income to grow despite falling NIMs-Our model suggests that net interest income will grow at a 3 year forward CAGR of 12.5%, with FY13E recording a 12.4% y/y growth. This will be driven by a faster fall in interest expenses (3 year forward CAGR of 15.9%) compared to the growth in interest income (3 year forward CAGR of 5.8%).

• Expansion in the loan book to be boosted by increased private sector lending-We believe the low interest rate environment coupled with a stable political environment will spur private sector credit growth, resulting in a 3 year forward CAGR of 16.2% in the loan book.

• Growth in customer deposits to be enhanced by increased delivery channels-We estimate that customer deposits will grow at a 3 year forward CAGR of 14.6% attributable to increased customer numbers (over 2.0m customers currently) as the bank spreads out to more counties in Kenya. This will be further supported by the agency banking network which grew 77.0% to 4,627 agents in FY12 accounting for 5.0% of the bank’s retail transactions (medium term target of 10,000 agents).

• Focus on Non-Funded income to support earnings growth– KCB Bank has invested heavily in technology (the bulk of the KES 2.2bn FY12 capex spend was in technology and innovation) which should see increased usage of mobile and internet banking. Currently, approximately 33.0% of the bank’s customers are registered to mobile banking, accounting for 10.0% of the bank’s retail transactions. Forex trading opportunities both locally and regionally should also provide a boost to non funded income which we estimate to grow at a 3 year forward CAGR of 10.8% to KES 18.2bn in FY15F.

• Adequately capitalized to meet the new prudential guidelines– CBK published its new prudential guidelines this year which will put pressure on bank Capital Adequacy Ratios as a result of i) Inclusion of Operations Risk and Market Risk while calculating the Total Risk Weighted Assets (TRWA) (Effective 1st Jan 2014) and ii) addition of a 2.5% buffer which increases the minimum statutory ratios to 12.5% and 14.5% for Core Capital/TRWA and Total Capital/TRWA respectively (effective 1st Jan 2015). KCB Bank has already effected the changes ahead of the deadline with its Core Capital/TRWA 600bps above minimum requirement and Total Capital/TRWA 650bps above minimum requirement as of 1H13.

• Cost management initiatives to drive the bank’s CTI ratio down– As the bank continues to leverage on technology and automation including mobile and internet banking while at the same time growing its agency network more aggressively compared to the brick and mortar concept, we believe that KCB Bank will continue to see an improvement in the Cost To Income ratio, easing 190bps y/y to 54.3% in FY13E and 480bps in the next three years to 51.4% in FY15F (management is targeting a 50.0% CTI in the next three years).

• Consolidation of regional businesses to support bottom line growth– KCB Bank has in the past 15 years focused on entrenching itself in the East Africa Region and South Sudan setting up operations in Tanzania in 1997, South Sudan in 2006, Uganda in 2007, Rwanda in 2008 and Burundi in 2012. This far, the regional subsidiaries have grown to account for 10.7% of PBT in 1H13 with South Sudan accounting for the highest contribution at 9.2%. The bank is now focusing on improving regional businesses with an aim of increasing their contribution to PBT to 15.0% by year end and approximately 20-25% in the next three years.

• Reorganization of asset and liability structure to ensure stronger margins– Corporate accounts make up 53.0% of customer deposits and 44.0% of loans which yields pressure on NIMs due to their expensive nature. In 1H13, corporate banking delivered NIMs of 9.0% while retail banking delivered NIMs of 14.4%. The bank plans on growing its retail portfolio more aggressively with a bid to achieve better NIMs going forward.

• Mortgage business to be boosted by growth of the middle class– In FY12, the value of KCB Bank’s mortgages grew 74.0% y/y to KES 31.5bn which saw the company overtake Housing Finance to claim the largest mortgage market share at 25.8% from 20.0% in the previous year. As the East African economies continue to improve resulting in a rise of disposable incomes, we expect an increase in mortgage uptake in the region.

Key risks to our positive outlook

• Rise of NPLs and reduced coverage a concern– KCB Bank’s NPLs have depicted an upward trend in the last two years after recording a decline for three consecutive years prior to that. More concerning, the current NPL ratio at 8.4% is the highest in our universe of large banks while coverage for the same appears to be quite low but around industry average. Our concern therefore, remains that should KCB Bank increase its provisioning to achieve its medium term coverage ratio target of 78-80% from the current level of 52.7%, unless the non performing loans reduce considerably, this would strongly impact the bottom line.

(Source: Kestrel Capital - 16.09.2013)

And worse still the board members are bringing in hand picked friends to head key departments. He has no control of the bank.