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This research report was prepared by the Research Department of Old Mutual Securities Limited. Old Mutual Securities Limited is a securities trading company licensed by the Capital Markets Authority (Kenya) for the purpose of facilitating trade on the Nairobi Securities Exchange.


Equity Group Holdings announced their  third quarter 2015 results this morning. Below are our views on the results:

KES MN
Sep 2014
Sep 2015
% Change
Total Interest Income
26,040
31,601
21.4
Total Interest Expense
4,496
6,000
33.5
Net Interest Income
21,545
25,601
18.8
Total NII
12,989
16,806
29.4
Total Operating Income
34,533
42,407
22.8
Total Operating Expenses
6,552
9,335
42.5
Provisions
900
1,696
88.5
PBT
15,694
18,231
16.2
PAT
11,213
12,811
14.2
Loans and Advances
206,699
263,402
27.4
Customer Deposits
243,017
316,093
30.1
Net NPL
465
490
5.5
Funded Income % of Operating Income
62.4%
60.4%
-
Non-Funded Income % of Operating Income
37.6%
39.6%
-
CTI
19.0%
22.0%
-
CTI less Provisions
16.4%
18.0%
-
Book Quality
0.2%
0.2%
-


·         Good Margins: PBT rose by 16.2% y/y from KSh 15.7B in September 2014 to KSh18.2B in September 2015 driven by higher interest income. Total NII was KSh16.8B, a 29.4% increase from KSh13B.   
·         High Provisions: Provisions were 88% higher at 1.7B compared to 900M in September 2015 due to an expected increase in customer defaults as a result of higher interest  rates and with the planned expansion drive which may come under pressure owing to wider loan book exposure
·         Growing Deposits: Customer deposits rose 30.1% percent to KSh316B in 3Q 2015 from KSh243B in the previous year.
·         Increased Profit: Profit After Tax grew by 14.2% to KSh12.8B in September  from KSh11.2 B in September 2014. According to  management Profits for all regional banking subsidiaries and non-banking subsidiaries grew by 92 %. The Kenyan banking outfit contributed 86% of profits down from 94% last year
·         Loans & Advances: Net loans and advances increased by 27.4% to KSh 263.4B in September 2015 from KSh 206.7B in the same period last year. We like the Group’s loan book growth momentum which is driven by aggressive product/service marketing, product innovation and better exploitation of its value chain across all its branches in the region. With sufficient capital buffers, we believe that this momentum will be maintained thus we forecast a 3-year CAGR of 15.3% and 14.8% in customer deposits and advances respectively to FY 17e.

Regards,

RESEARCH DEPARTMENT
Stockbrokerage
Old Mutual Securities
+254 (0) 20 2241 379/408 (Office)
+254 (0) 702 909 091/ 2 (Safaricom Office)
+254 (0) 731 001 206/ 39 (Airtel Office)
+254 (0) 20 224 1392 (Fax)
OMSecurities.research@oldmutualkenya.com (Email)



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