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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.

Good Morning, Barclays Bank of Kenya announced third quarter results this morning. Below are our views on the results:

- Sep 2014KES B Sep 2015KES B % Change
Total Interest Income 17.02 18.54 8.94
Total Interest Expense 2.23 3.34 45.22
Net Interest Income 14.72 15.20 3.27
Total NII 6.50 6.52 0.31
Total Operating Income 21.21 21.72 2.36
Total Operating Expenses 12.13 12.60 3.92
Provisions 1.16 0.987 -14.88
PBT 9.09 9.12 0.29
PAT 6.24 6.40 2.68
Loans and Advances 12.32 13.62 10.55
Customer Deposits 1.97 2.88 46.13
Net NPL 0.597 1.79 199.83
Funded Income % of Operating Income 69.37% 69.99% -
Non-Funded Income % of Operating Income 30.63% 30.01% -
CTI 57.16% 58.03% -
CTI less Provisions 51.70% 53.49% -
Book Quality 4.84% 13.14% -
  • Increased Profit: PAT rose by 2.7% y/y from KES6.24B in September 2014 to KES6.40B in September 2015 driven by a 3.3% growth in net-interest income. NII also slightly increased by 0.31% to KES6.52B from KES6.50B the previous year.
  • High Expenses: The bank’s expenses increased with total interest expense up 45.22% to KES3.34B from KES2.23B. Total operating expenses were up 3.92% to KES12.60B from KES12.13B.
  • Deposit Growth: Customer deposits increased an impressive 46% to KES2.88B from KES1.97B. Our investment case for Barclays is informed by a recovering loan book and deposit growth estimated at (3-yr CAGR of 6.02% to FY17e) driven by diversification into new business lines and strategic focus shift to SME’s.
  • Rating: Our rating on Barclays is Accumulate with a target price of KES17.79. The stock’s current price is KES13.95.

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