2016 was in "interesting" year for banks. We saw the collapse of 3 banks. Dubai Bank was expected. Chase and Imperial were not expected by most depositors or even the CBK. That hurt a lot of small-medium banks as a crisis of confidence took place.

The "Interest Cap" Act took the KBA by surprise. It was a political move and not well thought out but here we are. Many banks from the huge KCB to the deft Equity to the teeny weeny niche banks took a hit. I don't think there is a listed bank that didn't pay the price in its share price. Some more than others.

I admit I&M, like many banks, is going through a rough patch with the interest caps, rapidly growing GoK debt, corruption at the Lands Office (& GoK) and economic malaise.

Compared to 2015 for 2016 I expect,
- A higher level of NPLs
- Lower 4Q PAT (post interest cap)
- Similar PAT but probably lower for FY 2017
- A reduction drop in Loans Advanced
- More % of T-Bonds and T-Bills
- Lower forex profits [CBK has cracked down on dealers]

In 2017, I don't expect much improvement in the fundamentals. It will be a year of consolidation. Clean up the books/NPLs, reduce lending in favor of safer Gov't securities.

So I look (optimistically) towards 2018 [assuming no PEV]
- The interest rate cap/band to be loosened/widened [from 4% to 5%]
- Fewer new NPLs [coz of less lending in 2017]
- GoK starts printing money and paying off contractors = loan repayments
- Speedier resolution [including arbitration] of cases under Maraga
- Prudent (but slower) lending thanks to new/tougher CBK regs

I am a fundamental(ist). Not TA. Not insider info. A fan of Warren Buffett. I will change my mind as needed. I am not married to any stock.

So will I bail out at 78/- today? No, unless there's bad, bad news [not "code"]. I think the price has adjusted downwards as the above info got factored (baked) in.

It may go below 78/- but I am not a trader and the cost of transacting (sell then buy) is quite high on the NSE. I expect the results in mid-March as usual.

Talking of 2018 - One of the reasons why banks will start taking on less risky loans in 2017. For many banks, including I&M, 2017 will be about trying to regularize and restructure NPLs rather than lending to less-than-AA customers.

http://www.businessdaily...00696-h1purwz/index.html

[quote=VituVingiSana]Talking of 2018 - One of the reasons why banks will start taking on less risky loans in 2017. For many banks, including I&M, 2017 will be about trying to regularize and restructure NPLs rather than lending to less-than-AA customers.

http://www.businessdaily...0696-h1purwz/index.html[/quote]

Should we expect banking stocks to take a hit again in Q1 2017?

Still not really sure as the interest cap had already stimulated banks to give out "safer" loans.
However, there'll be an invariable increase in LLPs, negatively impacting the bottomline.

With this state of limbo, CFC and DTB seem to the safest bets. CFC due to its high non-interest income, DTB due to the good quality of its loan portfolio.

good thoughts wazua chief. Sometimes I have to rub my eyes when I see price of DTB and I&M. Still picking up Dtb bei ya jioni

I believe DTB needs to look more critically at loans given to property developers and under current market conditions provide for more potential bad loans by increasing what they report as NPLs. Be conservative.