This is what I gleaned from their statements:
1. Expensed LLP increased QonQ by about 300% for KE. Further to, Q12016 amount is 50% of the FY2015 amount. This would suggest that a huge loan/many loans moved from the watch to substandard category and lead to the spike. Either way the loan book is deteriorating.

2. I read the ceo say something to the effect that two loans for a combined 3b was non-performing and they don't expect to collect any amounts till June this year. Since there is no guarantee of collection shouldn't they be prudent and provide (as LLP) for them? Or is this a case of a slight-of-hand rescheduling the loans to bring them current for now but the problem will re-emerge in the future? Definitely a case of sleight of hand/pushing the envelope. They used the only loophole they could find.The difference in net NPLs exposure between end year and end of Q1 is 3.1b. The impression I get here is the following scenarios;
a) They had some collaterals that were rerated downwards and which left them exposed both at end year and end of Q1. Based on the re-rating, shouldn't these have been provided under LLP since KCB is exposed?BTW, I saw DTB's results. The Net NPL Exposure is ZERO. They should've. But they didn't. Conservatism went to the dogs. In a prudent set up a bank should match it's risk of exposure to the value of collateral backing the same at all times.
b) They were/are sitting on a huge pile of NPLs which were not provided for adequately in prior periods and their collaterals had been discounted to zero hence the exposure and spike in expensed LLP. This would mean the same will likely resurface in upcoming periods till all of them are written off. Ouch! The right way to do is 'expense' them now. Absolutely. This is the most incriminating predicament if it turns out to be true. Those reports by Citi bank and IMF on suppressing of NPLs numbers are firmly vindicated. Coz ideally you should make provisions automatically on the loan balance outstanding after you net the value of discounted securities. For them to have held out for so long(more than 5 years) without making the necessary adjustments speaks volumes.
c) They made naked/unsecured loans in recent periods which were sub-prime. Ouch! I wonder how salary checkoff loans that are in default are provided for. I would assume the same playbook as the normal ones the only difference coming in that the maximum allowable time period for full provisions of the non-performing ones would be a lot shorter to match the stipulated frequency of installments payable.
d) They did not make a full provision of the 3.1b coz the loan is in the process of being collected (as intimated by the ceo) or is in court where a favorable judgement is expected/already given awaiting execution. This clause as given in the prudential guidelines lines gave them an escape window from making 100% write off. Prudent? Of course not. But time will tell whether they were right. A favorable judgement, in Kenya, doesn't mean much. Collection of the judgement is a whole different matter. Tedious processes. Better to take a hit earlier and reverse things later if they become favorable.

3. If it turns out that they were wrong in their treatment of the amounts then Kcb will be roasted before FY2016.
I see Oigara is cuddling up to Njoroge. On Twitter. At Mindspeak. If PN cracked down on KCB through a forensic audit or other 'tests' of KCB's loan book, will KCB pass the test? I don't think so. And so many others will be in the same boat. Let's hope they make the findings public.

Other concerns/issues:

1. NPLs increased by 50% QonQ which in my reflects the tough business environment.
2.NIM shrunk by 11% QonQ.
3. Interest expense nearly doubled but deposits just increased by some.

The above implies that Kcb is highly correlated to the economy and so is Equity and Coop seeing as the latter two made money from cost cutting measures hence lower CTIs. Which begs the question how are smaller/lower tier banks defying the strong turbulence? I think some small banks will take hits in 2016 as KCB starts looking at their loan books closely though some small banks have lent to long-term customers who provide collateral. To the best of my knowledge only CBA, KCB and Equity do 'phone loans' without collateral.
The negative feedback loop is not complete.

All the capital ratios for Kcb KE declined and some are very slim which informs the rights issue. I saw one of the CARs is at an excess of just 0.8% for Kenya. That Scrip Dividend & Rights Issue are needed ASAP.

There is a flight to quality by banks that is from wanjiku oriented to the heavy guns. So less diversification. I think people are moving back, albeit slowly & cautiously, to smaller banks as interest rates offered are better and the speed/quality of service helps.

Deteriorating loan book and collaterals will not make for good reading.

KQ 2015 full year projection

Indeed.. progress is good. the price action on KQ in the next few weeks shall be key.. I feel good about the spring in its step